Women and pensions: why you need to care
Report after report shows that women are poorly provided for on pensions. For example, analysis by financial adviser Salisbury House Wealth showed 1.66 million fewer women than men were contributing to a personal pension in 2015/16. The Cridland Report found that women are likely to have 25% lower income on average than men in their first year of retirement.
A Mercer study last year estimated that the difference between women and men’s pension savings across the EU stands at 40%. Adding to this generally gloomy picture was a UBS report last week, which compared the retirement prospects for 50-year-old women in major cities worldwide and found that London fared among the worst in the developed world, beaten by – among others – New York, Milan, Tokyo and Sydney.
Many women rely on their husband’s pensions, but this too is a difficult path. Research from Scottish Widows shows that nearly three quarters (71%) of divorced people did not discuss pensions during divorce proceedings – if women had been relying on their husband’s pension, they risk being left with almost no provision in old age. A quarter of divorced women said they save nothing into a pension. The research estimates that divorced women are missing out on £5bn in pension payments every single year.
The research also showed that people tended to fight for a fair share of jointly owned property, a split of their combined savings or even a pet, rather than sharing a pension. Yet pensions are often as big an asset as the family home. Even if pensions are discussed during a divorce settlement, women are still missing out – 16% lost access to any pension pot when they split with their partner and 10% were left relying completely on the State Pension.
Poor understanding of pensions appears to be at the heart of the problem. Catherine Stewart, retirement expert at Scottish Widows, said: “Generally speaking women’s retirement prospects are worse than men’s. The persistent gender pay gap, maternity leave and career breaks can all hold back women’s earning potential and this often impacts pension savings. Relationship breakdowns can leave people really vulnerable but, quite simply, they’re also throwing significant sums of money down the drain.
“It is important that everyone – whether single, married or divorced – take steps to understand their finances and prepare for their independent future should a relationship break down. We would urge men and women to better understand the legalities around what happens to pension pots during divorce proceedings, as often they are the second largest, if not the largest asset a couple owns.”
Key steps for women and pensions
- Check your state pension provision – if you have taken a career break, possibly to raise children, or care for relatives, you may not have made enough national insurance contributions to be entitled to the full state pension. Check here.
- Check your workplace pension provision – if you are employed, contact your HR department to get a statement of your current pension entitlement. Employers are obliged to contribute to a pension for all their employees over a certain salary level.
- Check whether you have pensions from former employers. This will involve rummaging through old drawers to uncover any paperwork, or contacting HMRC’s Pensions Tracing Service.
From there, you should be able to tell whether you have adequate provision in retirement. You will also need to look at whether you have other sources of income, such as rental or dividend income, or income from part-time work. If you have a gap, you need to address it sooner rather than later.
- Anything is better than nothing. Saving £50-£100 a month into a private pension is unlikely to see you sitting on a yacht in retirement, but it is better than nothing, particularly when you add in the government’s contribution and compounding over time.
- Don’t be spooked by the big numbers. Pension providers are fond of telling people they are hundreds of thousands of pounds short on their pension provision. Just focus on doing something and what you can afford.
- Private pensions are easy to set up though major platforms such as the Share Centre, Hargreaves Lansdown or Fidelity FundsNetwork.
- You will need to decide what goes in your pension. Holding it in cash is unlikely to beat inflation and may leave you poorer over the longer-term. The platforms will have a range of suggested stock market or balance funds appropriate for pension savings.