As Waspi reminds us, women are getting stung on their pensions
There's an old saying in the investment business: “Judging an investment fund based purely on past performance is like driving your car looking only in the rear view mirror.”
I would take that even further. I would say that trundling towards retirement without checking on your pension and investments is like driving your car blindfolded. In fact, as we mentioned in a recent column, the pension companies like to call this ‘sleepwalking into retirement'.
It's especially important to keep up to date with how you stand on your pension saving when there is so much change going on that is affecting your pension – and particularly if you are a woman.
If you saw any of the TV coverage of the Budget last month, you might have picked up that while Philip Hammond was making his speech there were protests outside by members of Waspi – Women Against State Pension Inequality.
They were partly protesting in advance of the latest shift in the state pension age for women, which brought their state pension age to 65, in line with the pension age for men, just last week. This marks an increase in women's state pension age that began when it was just 60, back in 2010.
This means that 3.8m women who started their working life believing that they could take their state pension at 60 have now an extra five years to wait – and that will soon be six years, as the state pension age is scheduled to rise to 66 in 2020.
The Waspi's are calling this a cynical tactic by government to raise £30 billion by delaying pension payouts, and one spokesperson said: “There are still women out there who don't know their pension age has been set back.”
It has partly to do with the fact that our longevity is rising, which means we draw our state pensions for a few years longer. Here's the proof of the pudding: new figures released in September by the Northern Ireland Statistics and Research Agency (Nisra) show that in the decade 2007-2017, the over-85 population in this part of the world grew by a third, over five times faster than the overall population, and a lot faster than in GB, where growth of this age group was just 25 per cent.
There are now 37,000 people over 85 in Northern Ireland, many of whom will have been drawing their state pension for 20 years already.
This increases the pressure on the state pension, which, as we said recently, the Government Actuary Department are predicting could collapse by 2032, unless there are radical changes.
The underlying message here is that we cannot take anything for granted. We would be crazy not to accept that there could be radical changes to cut the cost of state pension provision, and that means that providing ourselves with an income in retirement is increasingly going to be our own responsibility.
Gone are the days when the bulk of our income in our later years would come from the state and the state pension.
There is another figure that is even more alarming for women. New analysis by the Prospect union, of data from the Department for Work and Pensions, shows that women's pension income is on average nearly 40 per cent lower than men's, from all sources: state, workplace, and personal.
The pension company Zurich then chipped in to say that men's pension pots are now on average about £212,000, compared with £132,000 for women.
We also know that the gender pay gap means that men under 35 now receive £217 more in employer pension contributions every year, compared to women.
The reasons given for this never change, I have quoted them many times before: time off work to raise a family or caring for other relatives is still work largely done by women – and while it is brilliant, essential work, it does reduce your pension contributions over your working life.
Then there is the likelihood that you may well return to work only to work part-time, and if you are earning less than £10,000 a year you will miss out on being auto-enrolled into the pension scheme that is available in your job.
To end a slightly downbeat scenario this week with something more positive, it has been encouraging to hear that auto-enrolment has reduced the number of women without a workplace pension from three in five in 2012 to one in five in 2017 – but if you are that one in five, you have to ask if you should consider starting a personal pension, rather than betting that the state will always provide.
Are you doing what I mentioned at the start? Are you driving your car blindfolded?
:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at “Kennedy Independent Financial Advice” or at www.mkennedyfinancial.com