Tuesday 25 June 2019

Why are women less financially ready for retirement? And what can they do to prepare?

Picture posed
Picture posed

Carol Brick, Managing Director of HerMoney

Women are not statistically worse with finances than men, although it’s a common stereotype. So why, on average, are they significantly less well off in retirement?

Generally, we still remain less well prepared for retirement financially for a number of reasons, including the fact that they tend to earn a lower salary and live longer than men, therefore needing a higher reserve from less income.

Taking time out to have children and bring up families also not only affects present earning potential but future income and quality of life.

Furthermore, giving up work earlier results in many women only being eligible for a lower level of State pension. And returning to work can be difficult for women with the cost of childcare, on top of missed promotions and expertise gaps.

The stats

Recent research by HerMoney into women’s financial affairs indicated 64pc of the working women surveyed felt they could not afford to put money into a private pension. 

However, only around one third, 36pc, expect to have enough money to last through retirement. 

While 47pc of those interviewed do have a private pension, reasons for not having one included the assumption they could live off a State pension (28pc) and the admission of not understanding pension funds (20pc).

Some 12pc said they will be provided for by their husband or partner, or by children or another relative, and 9pc, mainly in the 18-40 age cohort, said they were too young to put money into a pension.

A further 11pc of women said they have other assets, such as savings, investments or property that will provide an income in retirement.

What to do?

  • The sooner you start a pension the better, as you’ll have longer to save money and can make lower annual contributions than if you start later in life. The more you contribute, the more the government gives in tax relief.
  • Know how your money is being invested, and make changes if necessary – talk to a professional financial advisor if you’re not confident in this area.  Negative interest rates impact the value and return on standard savings with banks and other financial institutions.
  • Work for as long as you can to boost savings, investments and pension provision, as well as the important credits towards a full State pension.
  • Get the knowledge. It is crucial to build a credit history, to understand the household budget, and, most importantly, to plan for retirement.
  • Talk about money.  The internet, media, family and friends are all good places to start the learning process, and financial planning is one lesson we can’t afford not to learn. 

A qualified financial adviser, specialising in asset and wealth management, Carol Brick is Managing Director of HerMoney, a specialist division of CWM Wealth Management.

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