Women should be prioritising pension planning

Securing a longer and brighter future

Pension planning is a critical aspect of financial planning for everyone, but it holds particular importance for women. There are a number of unique factors that come into play:

Longer life expectancy
Career interruptions
The gender pay and pension gap

Pension planning should be at the top of every woman’s financial agenda!

Longer life expectancy

On average, women live longer than men. This increased longevity means that women will spend more years in retirement, requiring a larger retirement fund to maintain their standard of living. According to the Office for National Statistics, in the UK life expectancy is 78.6 years for males and 82.6 years for females. This means women might need their pension savings to last up to 20 years or more (if looking to retire in their 60s), making it crucial to start planning and saving early.

Women need to rely on their pension savings for longer but the average private pension saving for women is £99k, £39k less than men (averaging £138k for men). This is a staggering 32.9% less money saved than men.

Career interruptions

Many women take career breaks to raise children or care for aging parents. While these periods of absence are essential for family well-being, they can significantly impact a woman’s earning potential and pension contributions. When taking time out from work, it’s essential to think about the ongoing effect of pausing pension contributions and the knock-on effect that it has in retirement.

The gender pay gap

The gender pay gap means women, on average, earn less than men over their careers. According to recent data, women in the UK earn about 15.5% less than their male counterparts. Lower earnings result in smaller pension pots, making it even more essential for women to maximize their pension savings. It’s also worth pointing out here, how important it is to negotiate a competitive salary when accepting a new job or during annual reviews.

The gender pensions gap

These elements also lead to a gender pension gap. Studies show that women in their late 50s have less than two thirds of the pension saving of men. To look at this in a different way, given the small amount that women pay into their pensions, they would need to work an additional 19 years to retire with the same amount of money as men. Women are less likely than men to qualify for workplace auto-enrolment schemes because they tend to earn less and are more likely to work part-time due to caring responsibilities. This has a domino effect, leading to less money saved over a lifetime.

Aiming for a comfortable and wealthy retirement?

Make regular pension contributions
Understand the pension options available
Work with a Financial Planner

Commit to early and consistent contributions

Starting pension contributions early and maintaining them consistently is crucial for building a substantial retirement fund. Compound interest—the interest on interest—works more effectively over longer periods, meaning early contributions have the potential to grow significantly over time. Women should aim to contribute a percentage of their income to their pension from the very beginning of their careers and try to increase contributions whenever possible.

Explore pension options

Women should explore various pension options to find the most suitable plan for their needs. This includes:

Workplace Pensions

– Many employers offer pension schemes with contributions that can significantly boost retirement savings. Women should ensure they are enrolled in their workplace pension and take full advantage of any employer-matching contributions.

Personal Pensions

– For those without access to a workplace pension or who wish to save additionally, personal pension plans are an excellent option. These can provide flexibility and control over investment choices, along with significant tax savings.

State Pension

– Understanding the state pension and ensuring that sufficient National Insurance contributions have been made is also vital. Women should regularly check their state pension forecast to plan accordingly.

Seek professional advice

There’s value in seeking professional advice. Navigating pension planning can be complex, and working with a financial advice expert can make a significant difference. Financial planners provide tailored strategies based on individual circumstances, helping women to optimise their pension savings, investment choices and benefit from the tax advantages.

Women, take action in order to achieve financial freedom in retirement

Pension planning is not just a financial necessity; it is a means of empowerment for women, enabling them to secure their future and maintain their independence in later life. By prioritising pension planning, women can mitigate the effects of longer life expectancy, career interruptions, and the gender pay gap.

Start early, make consistent contributions, explore various pension options, and seek professional advice.

These are all crucial steps toward building a robust and reliable pension fund. Taking control of pension planning today ensures a brighter, more secure future for women, allowing them to enjoy their retirement years with confidence and peace of mind.