Saving for life
As fragmented career paths trounce on their retirement funds, women are left with pensions up to 60pc smaller than those of their male counterparts, writes Samantha McConnell
OVERALL pension coverage for the female workforce stands at 51pc, compared to 58pc for men, according to the Pensions Board.
However, in a study recently conducted by IFG Corporate Pensions we found that women fare even less favourably in real-life comparisons.
What further compounds the issue is the fact that women actually need more money than their male partners at retirement.
Longevity statistics indicate that women who reach retirement age can now expect to live until 88, compared to men's life-expectancy of 85.
There are a variety of factors that can negatively impact on a woman's pension fund and need to be considered when determining the appropriate contribution rates and other pension-fund choices.
Career interruption is one such a factor.
It is a common trend that many women choose to take career breaks when their children are young. This period frequently coincides with a key promotional stage in a person's career.
This in turn not only affects the possible pension fund, but also a woman's salary expectation upon returning to the workforce and the amount that the individual and their employer can contribute to their pension.
In addition, upon returning to work a woman's service up to retirement age is likely to be relatively short.
This shorter period, combined with the career break and the reduced promotional opportunities, can inevitably result in a much lower fund, possibly up to 60pc lower in some instances.
Factors such as life expectancy and retirement age also account for the difference in the retirement planning strategies for both men and women.
Man versus woman
A basic contrast between two cases of the pension contributions of a typical man and woman over the course of a working life highlights this significant transparency.
Let's take both a typical male and female worker.
While both may enter the workforce at the same age and on the same salary, as their career paths progress the discrepancies in salary and pension contributions become increasingly obvious.
This results in a pension funding difference, which could amount to hundreds of thousands by the time they reach retirement.
Some time after entering the workforce a woman may choose to take a career break for five or even up to 10 years, and often at a key promotional stage in their career.
During this period their male counterparts are often being promoted, resulting in a significant salary and enhanced pension benefits.
This has an affect on the amount of pension contributions in each individual's fund -- while the male's fund increases, the female's invariably ceases to grow until she re-enters the workforce.
A typical male could accumulate pension contributions of up to €100,000 during this time period.
Compounding this disparity is that when a woman re-enters the workforce after being absent for a number of years her salary could often be the same, or less than when she left.
She has missed out on those promotional opportunities to increase her salary and, therefore, the amount she can afford to contribute to her pension fund.
While she will receive increases in pay during her remaining years at work, it is unlikely that she will ever make up the difference between her and her male counterpart's salary and consequentially her pension fund.
In our typical example we found that the difference between the overall contribution amounts between a typical male and female can differ by over €150,000.
While the male worker clocked up more than €250,000 in employer pension contributions, the female struggled to hit €95,000.
This comparison did not allow for inflation or investment growth, both of which are likely to exacerbate these results.
Although notional, this study highlights the real-life difference that is often seen between the pension contributions of men and women over the course of a working life.
We appreciate that this may not be the case for all women, who in today's society are often the main income earners, but in general, women invariably contribute less to their pension fund than men.
For this reason, we would urge women to review their contributions and their funds in an effort to ascertain how much they will need to contribute to ensure a financially comfortable life in their retirement.
- Samantha McConnell, director of IFG Corporate Pensions