Women investing for better retirement outcomes

In every pension system around the world, the total pension outcome provides a higher retirement income for men than for women, according to the Mercer CFA Institute Global Pension Index 2021.

There is no single reason for this. Shorter time in work due to childcare commitments, lower-paying jobs that tend to be dominated by women, and the discrepancy between what men and women are paid for doing the same work all contribute to reducing women’s lifetime incomes – and thus the amount they can save towards retirement.

This is often not helped by pension design issues. The Mercer survey points out that “several design features in pension systems … aggravate the issue”. To be eligible for a pension may require you work for a minimum number of hours or earn a certain level of income or during maternity leave, women may not accrue pension benefits, as examples. The rise of defined contribution pension schemes means the accumulated benefit may provide a smaller lifetime income for women who, on average, live longer than men.

In South Africa, over half (51,3%) of male employees had their employers contributing to their retirement fund compared to 45,8% of women, according to Statistics South Africa’ s Quarterly Labour Force Survey Q2 2021 (source: https://www.statssa.gov.za/?p=14606). Around 7.2 million South African women are the main or sole income earners in their family. Their take-home pay often does not stretch to saving money.

It is clear there needs to be a concerted effort by government and business to improve pension outcomes for women. There are also a number of steps women can take to provide for a more financially sound retirement.

?1.????Empower yourself with financial knowledge

?Women should take the time to understand their own finances and how to invest to grow their nest egg. You don’t have to be an expert, but it is a good idea to understand how investing works. Get advice from a registered financial adviser, and make sure you understand their advice – if you don’t, keep asking questions until you are satisfied that you are comfortable with the information. It is your money and your retirement, so you have every right to clearly understand how it is invested and how it is expected to grow.

Don’t rely on your partner to manage your financial affairs. While you don’t need to take on every financial task yourself, you do need to know the state of your finances. Whether you’re married, single or divorced, the best way to secure your financial freedom is to make sure you’re fully involved in the financial-planning process.

?2.????Stay employable and connected

You may take time off work to raise your family, but once your children have grown, you may want or need to return to work. Maintain some skills and stay in touch with former colleagues, as it is often difficult to return to work if your skills are outdated and you no longer have contacts to call on.

Consider working part-time or studying while you are a stay-at-home mom. Having the ability to earn an income is essential to be able to save for retirement.

?3.????Don’t postpone saving until all your debt is paid off

While it is important to pay off debt, and not take on unnecessary debt, you should consider putting some money away for retirement at the same time. Speak to a financial adviser to help you structure a plan to pay off debt while saving for retirement.

?4.????Have a plan

With the help of a financial adviser, draw up a retirement plan so you know how much you need to save each month to retire comfortably. Your plan should show when you can stop working, how much you will be able to pay yourself in retirement, and where the gaps are. You can then work on improving your ability to retire comfortable.

?You may find it reassuring that women have been shown to be better investors than men when they make the effort to understand the investment world. Women tend to spend more time doing research, take more considered risk and are more open to advice.

?We encourage women who have not yet started on their journey to financial freedom to take the first steps as we celebrate women this month.

By Essay Govender, Senior Specialist, Mentenova Consultants and Actuaries

?*Please seek the advice of a registered financial adviser before making financial decisions.