HAVE you been stepping out to the doorstep lately to applaud our great health workers?
Well, we financial advisers have to applaud twice during the week. In a much less visible tribute, we stand in front of our spreadsheets on our computer screens, to applaud those other national heroes: the nation’s pension managers!
You may not be working at the moment, but in the background, pension managers are sitting in the sunshine with their laptops, ensuring your pension savings remain invested and growing, and reminding us that, someday, things will be back to normal and we will be ‘over the rainbow’.
However, for some of us, the crock of gold at the end of that rainbow might be a bit disappointing - women, listen up.
Women in particular need to keep thinking about their pensions, because of the particular difficulties of their situation compared to men, according to new information from Scottish Widows (SW).
In particular, women in the ‘lower middle’ earning category need to take note of this. If you normally work in a supermarket, a call centre, a nursery, any job like that, SW says over a third of you (37 per cent) have opted out of a work pension, because of other financial commitments.
While life milestones such as having a family or buying a first home are, of course, positive steps, they tend to cause financial stress and hinder the ability of women in the ‘lower middle’ to save.
Pension contributions stop after 39 weeks on maternity leave, and those who are trying to juggle work with childcare commitments often go part?time in their work. It’s the hidden cost of having children, and it’s a trend so universal it’s actually got a zippy name. We call it ‘the motherhood penalty’.
It means that less than half of women earning between £10,000 and £20,000 are saving enough for retirement, compared to over two-thirds of higher-earning women on £40,000 or more.
In fact over a third of these workers see no option but to leave their company pension scheme, just to make ends meet, so in addition to months or years of saving, they also lose out on valuable employer contributions and tax relief.
Women in the lower middle face competing demands on their income, such as paying for childcare or saving for a first house, with seven in 10 likely to face financial difficulties.
The bottom line is that over half (55 per cent) of women feel like they’re not preparing adequately for retirement. In the hurly burly of bringing up the kids and running to a part-time job, the whole pensions issue somehow gets swept under the carpet.
Forgetting about your pension like this is the real killer. Again, you can tell how common something is when they come up with a zippy term. This is ‘pension disengagement’, meaning that you simply forget about your pension, or fail to check up on it.
Even if you are managing to continue to save a bit, Scottish Widows tells us that four in 10 women are in the dark about how much they are saving.
Which brings us to my third zippy phrase of the day – the ‘gender pay gap’.
Men still tend to be higher earners than women, and better pension savers because they are less likely to take a career break in mid-life, they’re more likely to be in full-time work all their life.
No wonder that men, on average, have an additional £78,000 in their pension pot, when they come to retire.
Women – why not talk to us, to find out where you stand with your pension today. No matter how much or how little you are putting away, it’s crucial to know what you’ll have to live on, when you retire.
Whether you’re in the lower middle or not - knowledge is power!
:: 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 via www.mkennedyfinancial.com
