Financial advice is generally marketed as a white, middle class, male thing. For decades women have rarely been at the centre of their own finances. So Bristol Financial Adviser, Simon Jones from Unividual, offers a guide to some of the key considerations women and men should be taking when planning for the future, especially retirement.
We already know that there is an inconsistency between the amount that men and women earn. Women’s careers wrongly demand lower wages, which means mums regularly can’t afford to save as much. On top of this, women often have breaks in their career or take on part-time roles to balance caring for family. So, if you are a mum in a relationship where your partner or husband is the primary breadwinner, you could be left short when it comes to planning for your retirement.
The crisis of the pension deficit for women
According to data from the Chartered Insurance Institute’s Insuring Women’s Futures initiative, the average pension pot of a 65-year-old woman in the UK is £35,800. This is actually 1/5th of the average pension pot of a 65-year-old man. Recent analysis by pension provider Aegon found that a woman in her 30s who takes two years’ maternity leave and returns to work part-time, could miss out on up to £50,000 in retirement savings. The women’s pension deficit represents the precarious position confronting British women in later life. Many women are facing pension poverty. While pensions are not the only way you can save for retirement, for those in employment it is often the only way women are encouraged to save.
How you navigate this is about ensuring that the partnership with your spouse or partner is equal and that money management is balanced between you both. As a mum, if you are spending time away from your career, your loss in earnings means you are saving less into your pension. This means you won’t have as much money to retire on and could be dependent on support from other family members or your spouse. Women need to build a world of financial independence, for themselves and for their young women, and this needs to be fully supported by men.
A reliance on a spouse can also have a big impact on your children, especially if your partnership breaks down – something that might be beyond your control. If you are going through a divorce separation, you will need to think about how that impacts on your retirement planning. It’s often not appreciated that it isn’t compulsory to split a pension. This means that some divorce settlements leave pensions out, mainly because it is hard to quantify the value of a pension. If you have taken time off work to raise children, it is only fair that pensions are taken into consideration.
A lot of my clients feel overwhelmed and out of control when it comes to retirement planning. I get why – a lot of my female clients feel like they lack true financial independence and they don’t understand their personal financial situation, so we work hard to build this together. My approach is to educate clients so they feel empowered to make their own decisions instead of being told what to do by an adviser.
I often say to clients, “Worrying about your pension and doing nothing about planning for retirement is the worse thing you can do.” A small step you can take now, which will make a real difference to your future, is to pick up the phone and speak to a qualified retirement planner, who can represent your personal financial circumstances. Don’t just hope for something to fall into place as if by magic.
I recently spoke to Emma, a mum from Bristol, who had been worried about retirement planning for a long time. She explained, “For many years I’d worried about my pension. I had several old employer pensions which didn’t seem to be growing and I found it confusing. I knew that I really must do something about it but kept putting it off as I was just too daunted by the whole thing.
“I was also reluctant to use a financial planner after a brief experience of one in my thirties who just seemed to want to sell me products rather than look after my best interests. I finally took the bull by the horns and booked an appointment with the Government’s Pension Wise service which gave me some basic information to build on. From there I contacted several approved financial planners authorised by the Financial Conduct Authority. I approached Simon, a Chartered Financial Planner in Unividual’s Bristol Office, and he offered a free initial introductory chat. He helped me feel comfortable about having the next conversation, where we both went into much more detail about my finances and attitude to risk, allowing Simon to make a thorough review of my pension planning options.
“From the start I had confidence in Simon’s ability – he was able to explain often complex matters in a clear and calm way, including the charging structure model, so that I understood, which helped me to feel at ease. We mutually agreed my pension planning options, with Simon consolidating my old pensions into one that he can manage on my behalf. In just the first year this has grown enough to recoup the advice charges, plus some growth.
“I have since also talked to Simon about other family financial matters: my son needed financial advice on his credit rating; my daughter is looking for advice on a first mortgage; and my family needed advice on my parents’ inheritance tax concerns. In the coming months and years I plan to ask Simon for more advice with estate planning. I do kick myself for not doing this years ago but I am relieved that I have found someone I can trust and recommend, and that I can turn to Simon in the coming years for sound financial advice.”
But what about investing in this current time of uncertainty?
If you have stopped working or reduced your working hours, it is crucial your pension is topped up beyond your workplace pension. The more you invest, as the stock markets recover, the more you will benefit over the long-term. According to research from Which? couples need a pot of around £155,000 alongside their state pension to produce the annual income for a comfortable retirement of £26,000 via pension drawdown – or just over £265,000 through a joint-life annuity. You might feel that wouldn’t be enough for you in retirement, which is something that a financial adviser could help you understand.
What else do I need to think about when it comes to planning for later life?
It is crucial you also take into consideration how your financial plan supports you and your family in later life. Women tend to live longer than men, they also have higher costs for care which will eat into their retirement savings. On the basis that a woman’s savings pot, on average, is already lower than a man’s, it is crucial you know what provisions, if any, are in place for old age.
For single mums, this is something that you can start planning for now. It is also worth opening a dialogue with your own parents about what provisions they have made for long-term care as this will impact on your finances. If they haven’t put money away to pay for their own care, you might have to sell their home to pay for it or dip in to your own savings. Additionally these decisions might impact on whether you have to or want to take more time off work to care for elderly parents. This then has a knock on effect on your contributions to your workplace pension, which you should take account of.
You might be sat there thinking, “Have I left it too late, am I too old for financial advice?” We can assure you it is never too late to start managing your money better. Whilst society is making some inroads to reduce the unfair gap between women and men, there is still a way to go in many areas of life, especially in financial services.
If you want to understand a lot more about preparing for retirement, as a woman or man, you can read Unividual’s Ultimate Guide to Retirement Planning or listen to the podcast “How women achieve financial independence”.