This year International Women’s Day focuses on ‘Accelerate Action’. While celebrating how far we’ve come, it’s vital to also recognise the ongoing need to tackle lasting gender barriers. Zoe Brett of ethical financial planners EQ Investors explains.
As we come to celebrate International Women’s Day, we are reminded of the courage and tenacity of the Suffragettes and the continued work of many other incredible women in fighting the good fight for our equality.
This time of celebration and gratitude also comes with reflection. We’ve come a long way but there is more work to be done. One such issue is the gender pension gap.
What is the gender pension gap and why does it matter?
In essence, the gender pension gap refers to the reduced level of retirement savings the average woman has versus their male counterparts. The Pensions Policy Institute (PPI) reports that by their late 50s women’s pension wealth is just 62 per cent of men’s.
The PPI also reports that women are particularly susceptible to poverty in their retirement years with two thirds of pensioners in poverty being women. With such doom and gloom statistics, it’s easy to see why this particular form of inequality is attracting so much attention from policy makers and the female community.
Why is there a gender pension gap?
On average women earn less than men meaning they have less resources to save for their golden years. The gender pay gap is a whole other story but some of the driving factors include traditional gender roles such as women taking time out of their careers to raise a family, gender bias in the workforce and a higher percentage of women in lower paid industries such as healthcare and education.
Women are also more likely to accept part-time work to accommodate family responsibilities leading to some employers not offering access to a work related pension scheme. Additionally, women tend to have lower confidence in financial matters. This causes issues on two key levels; one being engaging in the retirement planning process and the other being less willingness to adopt risk with their investments.
How do we close the gender pension gap?
The government has made progress in closing the gender pension gap by encouraging workplace flexibility. Its aim is to support more women in managing a career alongside family responsibilities, financial education campaigns, childcare reforms to help mum’s get back to work and automatic enrolment into workplace pension schemes where earnings are above £10,000 per year.
As well intended as this is, history tells us we cannot rely on policy makers alone – so what can we do to help ourselves? If you are not already funding a pension then start, even if it’s just with something small.
Naturally any contribution will need to work within your affordability and the kind of retired life that you are aiming for but a good rule of thumb for starting pension contributions is to contribute half your age. For example, if you are starting a pension at age 20 then contribute 10 per cent of your income, if starting at age 30 contribute 15 per cent, age 40 contribute 20 per cent and so on.
An equal family life comes in many forms and there’s no one size fits all structure. However, sharing parental responsibilities equally frees up more opportunity for career choices that empower women to better fund their pensions. If parental responsibilities cannot be divided equally then another way to approach this is to have the breadwinning partner fund the others pension as part of household expenditure.
How equal is the State Pension?
The State Pension is dependent on National Insurance contributions. Gaps in employment cause gaps in your contributions record which leads to less State Pension. The government will allow an individual to make up gaps in their record with voluntary payments or, in some cases, credit the individual with ‘free’ contributions.
Engaging with a good financial planner can do wonders for building confidence with your financial health and get you well on your way to a financially secure retirement. Financial planners not only source the right product and investment strategy for you, but they educate to empower you on your financial journey. This can be particularly helpful for women when it comes to getting comfortable with risk. Taking the appropriate level of risk is how to make your wealth grow beyond just your contributions.
A financial planner will be able to assess your risk needs and maximise your growth potential within a range that is comfortable for you.
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