Moments that matter for women – part 3 – retirement and pensions
We’ve recently been looking at some of the key life stages for women and how these ‘moments’ can impact on their finances. Using figures and statistics from the Chartered Insurance Institute’s (CII) recent report - Securing the Financial Future of the Next Generation - we’ve seen that although starting on a similar level to men, women’s earning power declines in the middle stages of their careers. We’ve also seen that women seem to lack the confidence needed to take control of their finances.
In this, the third part of the blog, we’ll be looking at the dilemma for women when it comes to pensions and retirement.
We know that the State Pension qualifying age for women is on the rise – gradually increasing over the next few years until 2020, when it will be 66 for both men and women.
This seems to be filtering through to people’s working patterns - the average age at which women leave the workforce rose from 60.7 years in 1984 to 62.6 by 2012 (DWP 2014a). For men, the same period shows a rise from 63.7 to 64.8.
Despite men working on average only 2.2 years longer than women, they appear to be able to accumulate much more in their pension pots than women. By the age of 60–64, women have an average pension wealth of £35,700, with men having a pension pot almost four times higher. At 65–69 the gap widens again, with men’s reaching a peak pension wealth of £179,091 – five times that of the average woman’s peak pension wealth (ONS Wealth and Assets Survey, 2012–14).
These gaps are quite staggering and suggest that women are somehow missing their opportunities so far as pension saving is concerned. Perhaps some of the factors we have already seen – including lower earning potential, greater propensity to opt for part time working and a nervousness around financial management and planning – are contributing to the disparity in pension savings.
Statistics on ISA’s contribute to the worrying picture... Interestingly, women are more likely to hold ISA’s than men – figures from ONS Wealth and Assets Survey 2012-14 showed that 1.50 million 25-34 year old women hold an ISA compared with just 1.38 million men. However women’s average ISA market value is 83% of the average value for men (£5,118, compared with £6,180). Data from HMRC suggests that this is because women are also more likely to leave the money in cash accounts rather than investing it in a Stocks and Shares ISA.
For those women that think they’ll be looked after by a husband or partner’s income, the following statistic may come as somewhat of a shock. Research from the Pensions Policy Institute found that 76pc of women aged over 60 are single, widowed or divorced – potentially meaning they will have to fend for themselves financially at a time when they may either have retired or be starting to look towards retirement.
So what’s the answer?
There is no magic wand to wave and even if there was, there are multiple issues at hand here.
In order to leave their options open, women need to start saving for their future as early as possible. This would allow the cumulative effect of compounding to do its magic – allowing for funds to accumulate even in periods of low earning such as during career breaks to have children.
To have the confidence to do this, young women need to be aware of and understand financial planning from early on, giving them not only the knowledge to allow them to make informed decisions when it comes to savings and pensions, but also the confidence to take this forward.
Even if they’re not able to make savings as they try to save for a house or a family, or repay their hefty student debts, making a concerted effort to do so as soon as they’re able will give more options as they go forward.
Whatever stage they’re at, women who want to plan for their future would be well-placed to take advice to help maximise the opportunities available to them.
As a financial planning boutique specialising in advising women, Addidi speak your language. For help or advice regarding financial planning, retirement planning or investments, please get in touch with us.