Women in caring professions
Do we ever think about the future and a way to care for the carers? Caring professions are usually those that involve looking after other people. These include nursing, teaching and social work. They also extend to the very important childcare and early education sectors. These tend to be female dominated careers with over 90% of roles filled by women Unfortunately, these roles also tend to be lower paid and often have few additional entitlements e.g., health care or pension schemes.
Women also tend to be the main providers of informal care. Many people take career breaks, whether to raise a family, care for a relative or simply to reassess their life. However, women tend to be the primary care givers for children and aging family members, so these career breaks have most impact on both their salary, as well as on their pension in the future. An individual’s entitlements to pension during these breaks in service depend on the nature of the break and the terms of the pension arrangement you have in place
Women and pensions
Women receive lower pensions than men worldwide. This is largely due to the two facts outlined above. Women tend to have earned less and had shorter careers than men during their working lives. Obviously taking all the usual factors like, when they started it, where it’s invested and how long they have been contributing into account, can have an impact.
The gender pension gap can be as much as 20% – 25%. This is the percentage difference between what men and women are paid on average in an organisation. It is irrespective of roles or levels. This gap can have an impact on a pension. This is from the perspective of the percentage of income that is put into a fund and the tax-free rates that apply.
We must also acknowledge the simple fact that women live longer than men. Typically, this is 6 – 8 years longer with male life expectancy averaging 76 years and women 82 years. For a woman retiring at 65, that’s just under 20 years that a pension must provide a replacement income for. The bottom line is that women need a larger pension pot as it needs to provide income for a longer period
In addition to this a career break can have a big impact on future earnings. It is estimated that taking 1-2 years out of the workforce can decrease pension earnings by 14%. This jumps to 50% for an absence of over 3 years. Combined with the fact that many people also may opt to decide to return on reduced hours, even in the short term, there are many factors contributing to a negative impact on a woman’s pension.
How to start a pension
So, what can we do to address this imbalance? How can we start caring for the carers?
Remember for everyone when planning for retirement, the fundamentals remain the same. Start as early as you can, save an adequate amount regularly and invest it wisely.
Then taking the reality of the situations above, a woman needs to take these into account when addressing her pension needs. This requires additional pension contributions to meet the income needs in retirement. How much these need to be and whether they can be managed on a regular or additional voluntary contribution (AVC) arrangement, depends on what the estimated shortfall is and the nature of the contributing factor. When these factors are defined a suitable solution can be put into place.
Pension and retirement planning should not be complicated. That’s why we’re here to help. Just contact us and we’ll be happy to discuss your individual situation.
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