The rollercoaster to retirement:

A bumpy ride for women?

The journey to retirement often has a few twists and turns along the way – but, while everyone can face unexpected events in their lifetime, women can encounter a number of financial challenges that men rarely have to contend with.

In our latest article, we crunch the numbers, and reveal how early planning and savings strategies can help mitigate the impact of these ‘bumps in the road’.

There are a number of physical, emotional and social demands placed on women throughout their lifetime that come with short-term financial setbacks and longer-term consequences. Setbacks that, in some cases, aren’t faced by men.

The twists and turns of a woman’s life

Since a young woman is less likely to live at home with her parents than a young man, median rents in England will, on average, snatch away 43% of her salary – versus 28% of his.1 As she reaches her late 20s and early 30s, the cost of a first home will amount to 12 times her salary (8 times for a man).

Throughout life, women take on the lion’s share of caring responsibilities for children, grandchildren and elderly relatives. To provide this care, they may take some time out of work, or work part-time. This impacts their earnings potential and is one reason why the gender pay gap between men and women sits at around 15.4%, especially when you take into account both part-time and full-time workers.2 Career breaks and part-time working affect women’s ability to save for themselves and their retirement.

Lower earnings means fewer years of National Insurance contributions; which is another reason why, on retirement, a woman’s pension pot is an average 37.9% lower than a man’s.3 This disadvantage is commonly known as the ‘gender pension gap’.

But the disparity doesn’t stop there. Divorced women’s median pension wealth at retirement is just 25% of that of their male counterparts.4 And, living longer brings chronic age-related illnesses – therefore, women can expect to pay significantly more in care home fees than a man.

Empowerment through early planning

“It feels like everywhere you look, you’re being penalised,” says Sharon Bonfield, Advising Women Marketing Lead at St. James’s Place. “But that doesn’t mean you can’t do something about it.”

Indeed, a woman’s journey to retirement does appear bumpier, but planning early and investing sooner can help alleviate the financial impact of life events such as starting a family.

Because of the power of compounding, even a small amount of money put away early can make a big difference later on. Bonfield says:

“When it comes to long-term plans like investing for retirement, the sooner you start the better. If I were in my 20s, I’d ensure I was enrolled in my workplace pension. A lot of people opt out at that age because of more pressing costs like rent and bills.”

It’s never too late to get organised

That said, there’s still plenty you can do if you’re now in your 40s, 50s and 60s.

If you’ve taken time out of work, check to make sure you’ve made sufficient National Insurance contributions to qualify for the full State Pension. If not, you can top them up by applying for National Insurance credits.

Check out our recent article, Five tips for unlocking your pension potential, which discusses how to track down lost pension pots, what to do about your cash savings, and how to do a stock take.

All of that said, financial planning should be a family affair, and your partner has a critical role to play too – whether that’s sharing some of the caring responsibility, or paying into your pension while you’re off on parental leave.

The value of advice

33% of women rate their knowledge around financial matters as low5we need to change this! St. James’s Place research has demonstrated that women who have taken financial advice felt that it empowered than to make informed decisions about their financial future and gave them a sense of comfort.6 We want all women to feel empowered and able to discuss their finances and long-term plans.

The path to financial well-being is seldom smooth – even less so for women, who encounter a myriad of financial challenges along the way. Wherever you are in life’s journey, though – and whatever the challenges you face – there’s no substitute for simply asking questions and having a plan in place.

And that’s where Wellesley Wealth Advisory can help. Give us a call today – your future self will thank you!

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time.  The value of any tax relief is dependent on individual circumstances.

Sources:

1 Women’s Budget Group, A home of her own, housing and women report, 2019
2 Gender pay gap in the UK: 2021
3 Achieving Gender Equality in Pensions, Prospect 2020
4 NOW: Pensions research, 2020
5 FCA, Financial Lives 2020 survey: the impact of coronavirus, 2021
6 ILC-UK and St. James’s Place Wealth Management, Peace of mind: Understanding the non-financial benefits of financial advice, 2020.