Calling all ladies: are you aware that there is a sizeable gender pension gap, so that by the age of 65 your pension is likely to be ￡100,000 less than your male counterparts?
The current retirement income gap between men and women is 39% (￡19,000pa -v- ￡12,000 pa for women), a staggering ￡7000 per year.
Why is this? There appears to be several factors at play, including:
- A gender pay gap of 7.7% currently, so women are paying less into their pension schemes than men.
- Taking time off work to raise children.
- Possibly, women are taking more career breaks for different reasons, often revolving around other family members.
- A general failure to appreciate the importance of pensions on divorce.
The result of this shortfall in pension provision is that 23% of single? women pensioners live in poverty, compared to 20% of single men and 13% of pensioners in couples.
One third of women over 50 in the UK rely on the state pension alone and will fall short of the minimum standard of living for retirement according to Age Uk.
The rate of poverty for women is projected to increase from 20% to 26% by 2040, compared to a projected increase of 15% to 19% for men.
So what should we all , but in particular women, be doing?
- Educating our young people, particularly women on the importance of pension contributions from the day they start work, encouraging them to start small, making sure they match the maximum contribution their employer is prepared to make. Starting at age 18 instead of 22 can mean an extra ￡46,000 in retirement.
- Parents and grandparents should consider closing their daughter/ granddaughter’s likely gender pension gap; an extra contribution of ￡100 per month would close this gap.
- Women ( and men) need to pay more into their pension schemes whilst they are in work if they are to have a comfortable level of income at retirement. If you are going to have several years out of paid work to raise children then you either need to pay more in at the front end to compensate for these missing years or else the family should take steps to boost your pension provision. Do not rely on your partner to look after you in retirement-? you may no longer be together.
- On divorce women need to be aware of the pension situation between the two parties and the Solicitor acting for the female needs to ensure their client is suitably compensated for any disparity in pension arrangements. 60% of women do not discuss pensions as part of their divorce according to recent research from Scottish Widows, leading to an average loss of ￡77,000 in their pension pot at retirement.
- Employers need to ensure there is no gender pay gap and to encourage all their employees and particular female employees, to pay in as much as possible.
- Make sure all pensions from previous jobs are growing well, reflect your risk profile, are well diversified and that the charges aren’t too high. Many occupational schemes use passive funds which although very cheap tend to grow more slowly than managed funds.
- Speak to a financial adviser to make sure you are on track for a comfortable retirement rather than facing poverty in your old age.
Why not have a conversation with an expert? There’s no charge and we will point you in the right direction. We can do this face to face at our office off Elmete Lane in Roundhay, Leeds, LS8 2LQ or virtually if you prefer.
Check us out on www.lazenbysfs.co.uk or ring the office to make an appointment on 0113 322 0700.
