Women! Time to get even

Written by Rebecca O'Connor on 22nd February 2017

Dear ladies,

When it comes to inequality, there is much to get angry about. But our mission today is not to make you more angry. It is to show you, calmly, what the problem is, and suggest some ways you might endeavour to overcome the injustice of the situation you find yourselves in.

What am I on about? Pensions. Don’t stop reading. DO NOT stop reading. If you stop reading now, you are letting the patriarcy win. If you stop reading now, you are letting down every woman that ever fought for the vote, for womens’ education, for everything. Because, might we be so bold as to suggest, the final sphere, beyond politics and beyond education that needs to be equalised, is the economic one.

It’s not equal, people. The women that make it work and come out the other side as well off as their male counterparts are the anomalies, not the rule. You do not have to ask too many people before you hear a personal account from a bloody amazing woman who had the audacity to indulge her biological clock and is now in some piss-poor job, well below her paygrade, for the rest of her life. That First in Economics? Its outlet is now the food shopping.

There is nothing wrong with women choosing this for route for themselves, of course. Being a full time mother is the hardest job around, bar none. And actually being there for your children is one of the most selfless things any parent will ever do. However there are many, MANY women that don’t want to give up their careers, that feel compelled by a sense of vocation to continue to work, to contribute to society intellectually as well as by raising the next generation, but are forced into accepting less than what they hoped for their futures by the realities of: shoddy support for parents with under 3s, the grind of the school run and the high cost of childcare relative to salaries.

Structural change, led by the Government and supported by business (come on, the CBI), is required. Government support for companies employing women, to help get those companies and those women through the child-bearing years with as little disruption to business, is required. If you don’t like swearing, look away now: Some fucking fairness, not just the odd token, half-arsed policy, is required.

Or else the next generation of girls, seeing how let down by the system their mothers were, and when they are perhaps a bit older, recognising the failures of successive, broke Governments and the unlikelihood that this will change in a world dominated by resource scarcity, won’t even bother, and we will unravel decades of at least psychological progress in a few years.

Sorry to break that earlier promise to go through the problem calmly. But it’s quite hard to avoid a red mist when you see a figure, such as that put out today by Zurich, the insurance group, that shows there is a £47,000 shortfall in employer pension contributions for women, by the time they retire.

The pensions gap is a massive social inequality. We ranted about it last year, too. The findings lift the lid on three factors contributing to the shortfall in women’s pension pots: the gender pay gap leads to a lower value of employer contribution as a percentage of salary, women are still more likely to take career breaks to raise a family, and men typically work in sectors with more established, or more generous pension schemes – and for bigger companies.

Rose St Louis of Zurich Insurance, said: “The impact of the gender pay gap on women’s pension pots is no secret, but this difference in the contributions that they receive from their employer presents a serious – and growing – problem.

“The ‘triple effect’ of smaller salaries, career breaks for women and lower contribution rates needs to be addressed: we can’t ignore a £47,000 shortfall. Workplace engagement and guidance has a central role to play in helping women make the most of their saving potential while they are working full time, but it is now crucial that greater focus is placed on ensuring that this gap is not allowed to grow any further.”

There were also more men in the UK-wide analysis (154,999 vs. 95,262 women), indicating that, even before the gap in salaries and contributions levels has an effect, there are significantly more men receiving pension contributions in the first place. This is likely to be impacted by the auto enrolment eligibility rules which mean that employees earning less than £10,000 per annum are not automatically enrolled into their workplace scheme.

What you can do

For starters, immediately stop viewing your husband’s or partner’s pension as your own. Immediately stop entertaining notions that you will one day strike it rich. And stop imagining that voluntary euthanasia will be legal by then, so you won’t have to live through retirement anyway.

Then, start saving – not into your little, cute cash ISA or instant access account but into a proper stocks and shares ISA, Innovative Finance ISA, Lifetime ISA or PENSION. Or if you can afford it, ALL OF THE ABOVE. You can still invest small amounts monthly into these. Set up a direct debit and you won’t even notice you don’t have the money anymore.

Why not cash?

Stocks and shares returns are way higher than cash returns over almost any long term period. It’s only when you get close to actually retiring that you might be justified in switching your money to lower risk cash. If you are not employed but self-employed, as so many women are, you will not be receiving any pension contributions from an employer so you will have to do your own private pension.

A pension plan gives you FREE MONEY in the form of tax relief, meaning you get an automatic 20% or 40% uplift on your contributions, depending on whether you are a basic or higher-rate taxpayer. If that still doesn’t make sense then just trust us, pensions are a good deal when compared with other retirement savings options.

Lifetime ISAs, to be introduced in just over a month, also represent FREE MONEY. But rather than offering tax relief, the Lifetime ISA gives you a 20% Government top-up on savings made, as long as you keep them in the ISA until you retire (or buy a house, if you are a first-time buyer).

Finally, if you give even a capuchin monkey about the future of the rest of the world and the planet your progeny will inherit, choose sustainable funds or asset managers that build in concern for environmental and social issues. They perform as well as the more rapacious, mainstream funds out there over the long term, which retirement saving, unless you are 60 already, is. So why not? EQ Investors has a positive impact portfolio we likey.

There’s a wonderful fund search tool on the website Fund Ecomarket and an app called the Shape App that gives individual stocks a rating for their responsibility, if you are bold enough to want to pick your own companies to invest your ISA in. Alliance Trust Sustainable Futures, Impax and WHEB Asset Management are all names to look out for.

Where I am putting my own pension savings

One of the reasons I get so emo about this issue is that my own pension savings are kind of on hold as I have a 2-yr old, work part-time, self-employed and am paying nearly £1,000 a month in childcare. I am the classic pensions gap victim. Nevertheless, I am consoled by my more generous than average previous employer pension scheme. My former workplace paid 11% on top of my 5% contributions, so when I left, I had a decent pot of about £35,000 sitting there gaining £s. It’s still there – there are guarantees which I would lose if I moved that pot elsewhere.

In addition, I co-own a small flat in Nottingham with my sister, which we bought in 2006. This is currently rented out. We are repaying the capital on the mortgage, and so when the time comes for me to retire, the mortgage will be long gone and the flat will hopefully still be generating some income. This is not ideal. That income will still be taxed. I will still have the outgoings of property maintenance. But I will also have the option of selling it and re-investing that cash (minus the capital gains tax) elsewhere, when the time comes.

Zurich has launched a series of new tools to help people imagine, plan and manage their own financial well-being. To access these go to:https://www.zurich.co.uk/futureyou/pensions.