WELCOME to a brand new, if slightly unusual, New Year!
And it brings with it some incredible news about the effects of the ‘Covid-19 Effect’ on the ability of women, and young women in particular, to save, and highlights why they would benefit from financial advice.
First of all, the good news is that overall, the so-called gender pension gap – the difference between how much men and women are saving – is better than it has ever been. In fact, it’s down to just 1 per cent of a difference, as the proportion of women saving adequately hits a new high of 59 per cent. We are getting better at salting away a few bob for our retirement!
These are new facts provided by Scottish Widows (SW), in their annual ‘Women and Retirement’ report, which was published just before Christmas.
However, the savings gap is based on a percentage of what you are earning, and men’s and women’s earnings are still very far apart. Due to social and situational differences, a man saving adequately is still likely to be on a higher salary, and can put away £1,300 a year more than a woman, because he is more likely to be in full-time as opposed to part-time work.
Scottish Widows’ definition of ‘saving adequately’, as we know from this and previous reports, is when you are saving at least 12 per cent of your salary.
To put it another way, in a totally theoretical scenario just to illustrate this pensions gender gap: this means that, as a woman, you would need to be still working when you turn 100, to have put as much as a man into your pension. SW works out you would need to work 37 years longer than a man, if you wanted to play ‘catch-up’ after reaching your current retirement age of 66.
The gender pay gap is likely to get worse before it can get better, due to the virus pandemic and our current ‘lockdown number 3’.
We know that the duties of childcare more often fall on mum than on dad, in fact SW say the majority of UK families with a child under four consist of a father working full-time and a mother working part-time or not at all. If you work less hours, this limits your earnings, which in turn limits how much you can afford to save.
Of those working, as a woman, you are more likely to be a part-time worker. Here’s a number to remember: three quarters (75 per cent) of all part-timers in the UK are female (Source: Office for National Statistics ONS Labour Force Survey).
It’s therefore no surprise that, as a woman, the three lockdowns have hit you hard. You are much more likely to work in one of the ‘shutdown’ industries, such as the hospitality trade. You’re more likely to have had your income cut by furlough or even worse, to have lost it completely by having been made redundant.
Some individual cases sketched in by Scottish Widows, based on interviews with women surveyed, showed that it’s typical for a woman to have set aside less than she would want for her pension, and to indicate she is strongly reliant on her husband’s more generous pension.
Quite apart from workplace pensions, we’re having to wait longer for our state pension. Your retirement age, when your state pension kicks in, is rising gradually. It’s 66 now, soon rising to 67 by 2028, and a further rise to 68 is due to be phased in between 2044 and 2046. This means you, and your partner too, will be waiting longer, before you get your state pension.
The one positive that comes out of the virus pandemic is that we have more time to contemplate and reassess our position.
There are many things we can do to improve our savings situation, and in particular our saving for retirement. The first is finding out how we stand right now, how much we have saved so far, and how much we are likely to have, when we eventually retire.
Could 2021 be the time to take some advice on saving for your retirement?
:: 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 Ltd or at www.mkennedyfinancial.com
