According to research quoted in the Financial Times this week, women are found to have more concerns about retirement and meeting their income needs than men. Looking at some of the inherent disadvantages, this increased concern can be seen as justified. We look at some of these issues in this article and discuss their impacts for your financial planning plus some actions you can take.
What are some of the disadvantages?
Unpaid labour. It is still a fact that more unpaid labour is performed by women. This may be ongoing day to day which shapes how households may delegate home and income generating tasks. It is also that period when children are young, where women are more likely than men to reduce working hours or take a career break. This leads to the second factor.
Pay gap. It is an unfortunate reality that, although this has been discussed at the higher levels of governments and corporates for decades, there still exists a real pay gap. For the same employed position, with the same experience, women are still likely to be paid less than men. Data released by Eurostat, the European statistics agency in 2019 quantified the gender pay gap in the EU was still at 14.1%. This gets exacerbated by the above points of career breaks for family, the lack of value placed on unpaid labour and relative underpayment when returning to the workforce.
Pensions. Here is where the impacts go beyond your pay packet. If you are earning less, relative to an equivalent male counterpart, it means your pension contributions will be lower. Therefore, your pension income in retirement is likely to be smaller. That means either a more compromised standard of living and/or more retirement insecurity, especially when we consider that life expectancy for women remains higher than for men; you may be living longer on a smaller amount.
Casualising of Employment. This is not exclusive to women, it is happening to many working professionals across a broad range of industries. It does have a compounding effect on the above factors though. If your full-time employment is being changed to a casual contract, you will be less likely to receive any employer pension contributions and this will impact your retirement plans. The lack of security of a full-time employment contract will also make it harder to get a mortgage and, in some cases, even to rent.
Separation and divorce. A division of assets on divorce, whether arrived at amicably or acrimoniously, can have a similar impact. We see clients in this scenario where they may be suddenly asset rich due to proportionate proceeds from a house sale, for example, but disadvantaged in other ways. First, if you don’t have a sufficiently high, or permanent income, even with larger assets, you may not be able to get a mortgage. And your asset that was once in your primary residence and, in most countries exempt from tax, may now be taxable under a wealth tax, a capital gains tax or other asset tax depending on where you are living. You may find your capital base being drawn upon for living costs and if not strategically managed it can erode.
What you can do
Being aware of these disadvantages is good and rallying against them is important. In addition, it is important to structure and manage your own life and finances to put yourself in the best position for your financial security and the ability to live the life you want now, and in the future.
Know your pension details. Many people we speak with are not aware of where their pensions are, how much they are worth, the amounts being added to them and the conditions under which they can access them in the future. It will likely be an important part of your income in retirement, it is worth spending some time gathering the information and knowing where it is at and where it is projected to be at the time you retire.
Get Professional advice. Take the time to speak with professionals. Work out what you want and put a plan together to manage your reality with your aspirations and plans for now and for the future. Having an actively managed and structured plan can have a profound impact on your life.
Investment for the future. One of the biggest impediments to actively managing your wealth for the future, whether in a pension or as an investment, is knowing where to start. It can be a complicated landscape balancing having too much cash at one extreme, where you are getting no growth, and complicated and sometimes speculative investment structures at the other. Your investment portfolio should be the implementation of your financial plan strategy which itself is the map to get you from where you are to where you want to be. Take the time, to understand what is important to you and make sure your approach to managing your money is aligned to the end targets.
Feel free to speak with us at Black Swan Capital to get pension clarity, to get advice and set out a plan, and to align your plan with your goals and how you manage your money. We work to give you financial security and peace of mind.