Email to a FriendThis year's International Women's Day theme is EMBRACE EQUITY.
One of WIBN's key principles is that EMPOWERED WOMEN EMPOWER WOMEN.When women are empowered amazing things happen. A more equitable world leads to more empowered women. And more empowered women lead to a more amazing world.
We asked our members to think about what women's equity and empowerement means to them. Our Caversham member Emma Cowley is an Investment Manager at RBC Brewin Dolphin - Helping people to save, plan and invest for their future.
She wanted to shine a light on the gender pension gap that many women are facing and offer some advice to combat this.
Women could be heading for an even worse retirement crisis than men, with women more likely to underestimate how much they need to save into their pension and fewer women investing despite rising inflation.
On average, female respondents think they’ll need £472,000 to fund a comfortable retirement – that’s £77,000 less than their male peers. Whilst this sounds like a sizeable pot, worryingly, our analysis suggests someone with a pot of this size could risk a retirement income shortfall or be forced to work for several years longer than anticipated.
The gender pension gap stems from the fact that women tend to earn less than men1 and are more likely to take career breaks to look after children. On average, women’s pension pots at age 65 are only one-third of men’s at the same age.
How much do you need?
Despite these lower expectations, just 37% of women are confident they’ll save enough for retirement, versus 57% of men. Even then, when we asked what they’d do with an extra £100 per month, only 31% of women would save it into a pension, compared with 41% of men.
This lack of understanding around saving for retirement suggests the ‘gender pension gap’ is unlikely to narrow any time soon.
It is clear that women need to take action now if they are to enjoy the same standard of living as men in their later years.
What can you do?
There are some simple steps you could take now to improve your chances of a financially secure and fulfilling future.
1. Make the most of workplace pensions and tax relief
Pensions are a great way of saving for your future because of the tax relief you receive on personal pension contributions. A £100 contribution only costs you £80 if you’re a basic-rate taxpayer or £60 if you’re a higher-rate taxpayer. If you’re a member of a workplace pension scheme, you’ll also benefit from employer pension contributions, which can really help to supercharge how much money you have at retirement.
2. Try to make up for any gaps by increasing contributions if you can
If you’ve taken a career break, think about whether you could increase your personal pension contributions to make up for any savings gaps. This might seem impossible right now, but creating a budgeting and savings plan is a good place to start. It may be the case that you can afford to save more into your pension once your children finish nursery, for example.
3. Check whether your existing savings could be working harder
If you’re unable to save more money each month, another way to boost your finances is to check your existing savings are working hard enough. Workplace pension providers often put you in their default fund, which might not offer enough long-term growth potential. Meanwhile, leaving excess money in a cash savings account could result in your money losing its real value as inflation erodes its purchasing power. A financial adviser can help you decide which pension fund is right for you and invest your money so that it has the opportunity to grow in real terms over time.
4. Get some smart advice
Pensions and investments can seem complicated, but sticking your head in the sand isn’t the answer. The steps you take today could make a real difference to your future, enabling you to reach your goals faster and enjoy a fun-filled retirement.