Women need to plan their pension now

When it comes to pensions, women should not hold back. Julie Wilson, chief executive officer of financial planners PenLife Associates explains.

 Plan your pension

Calling all women! Plan your pension now.

Pensions are often overlooked, because who needs to worry about them yet? Everyone does; particularly women.

Women are living longer than men, and often take breaks from employment to raise children. It is likely therefore that they will have earned less than men and inevitably their pension will be smaller. Which does not help when they live longer.

Of those who have children, two-thirds return to work part time, usually earning 30% less than working full time.

With all the plate spinning needed when working and raising children, retirement planning tends to go to the bottom of the list. But women need to get their act together and start making smarter decisions with their finances otherwise their money will not live as long as they do.

Related: Pensions for women need addressing as they save less than men

By their 60s, women typically have £51,100 in their pension pot; while men have an average of £156,500. Given that women live on average 3.7 more years than men for them to draw the same pension income throughout their retired lifetime, they need to have around 5-7% more saved than men by retirement age.

Nobody, female or male, wants a life of poverty in old age just because they did not seek advice on how to invest for the future.

Prioritise the pension pot

There is a lot of noise around the gender pay gap but this can be avoided very easily. Just an extra 2% of salary contributed to a pension would do the trick. One can argue that it is unfair women have to contribute more to be equal with men; but this action could secure a woman financial comfort in retirement, and the sooner they do it the better.

I want people to enjoy their retirement and for their pensions savings to last as long as they do. I do not want them to hand over their hard-earned money to the tax man; but that is what can happen without proper advice. Prioritising just this one thing can contribute towards a better quality of life as you get older.

For some women, investing some of their pension pot in an annuity or guaranteed income for life is a good option. This can avoid the risk of being left without enough money in older age.

Of people living alone over the age of 65, about 70% are female, so the urgency to make smarter decisions with pensions is acute.

Remember the pension when getting a divorce

Pensions are often forgotten about or left out entirely during divorce settlements, leading to one partner being made worse off in later life. Nowadays, one-in-three women age 55-70 divorce and we see far too many divorces where there has been no proper consideration of the pension value when dividing assets.

State pension reforms also mean women retiring on the new state pension from 2016 onwards will have no provisions to claim on their spouse’s contributions. So, do not rely on your husband’s record. In fact, never rely on a husbands’ pensions at all. It is all about finding the advice suited for you and getting the most out of what you have got.

How women are missing out on pension saving

More women than men are failing to save adequately for their retirement, with 34% of women claiming that they do not have a pension plan and 41% of those saying they have no intention of starting one; compared with 17% of men not having a pension and only 13% saying they do not plan to get one.

More women than men do not intend to start paying into a pension until they are at least 40 – 17% compared with 13%. Some think they will leave it even later with 9% of women not intending starting to pay into one until they are over 50 compared with 4% of men, according to financial planners Willis Owen.

Equally of concern are the number of people who have a pension but are cancelling payments into schemes: 35% claim to have stopped paying into a pension scheme over the past 12 months, with 28% saying they could not afford it and 20% saying they would rather use this money for other purposes – 14% would prefer to use it to help them on to the property ladder.

Adrian Lowcock, head of personal investing at Willis Owen, said: “It is alarming to see so many people without pension plans, or who have stopped paying into them. They are missing out on generous tax benefits provided by saving into pension schemes and the reality for many of them is that they will never be able to stop work and enjoy a retirement.”

Female pension savings too low

Women typically have only a third of the pension savings men have, due in large part to working part- time and having to balance caring responsibilities. According to a new report Facing an unequal future – closing the gender pensions gap from NOW: Pensions, based on research by the Pensions Policy Institute, women’s inability to save for their future results in a 47% reduction in women’s pension wealth compared to men by their late 50s.

One key problem is that women often work part-time (41% of the working population in 2018). If their salary is below £10,000 they will not be auto-enrolled into a work pension scheme and thus miss out on saving into one and receiving employer contributions.

Sam Smethers, chief executive at The Fawcett Society, the women’s rights campaigning organisation said: “Women face a double jeopardy. They both carry more risk throughout their lives and are less able to take action to protect themselves.

“The shocking pensions gap that women experience is a result of a lifetime of income and workplace inequality.

“If we introduced a carer’s top up for pension contributions and lowered the threshold so that more low paid women in part-time work could benefit, that could
make a real difference.”

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