28 September 2020
Gilson Gray
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Because women typically live longer than men and may have asmaller pension pot, they need to plan accordingly to make theirmoney last.
While longevity sounds like a blessing, we wouldn't want tobe unwell and struggling financially during our later-life years.But many women run the risk that this will be their future. Notbecause they've got the 'right genes' or live asuper-healthy lifestyle: it's simply because they were born awoman.
A 40-year-old woman has a one in four chance of living to age96, and a one in ten chance of living to 100.1 Betterhealthcare and positive lifestyle changes have helped to raise lifeexpectancies across the board, but women still are likely to livelonger than men. And with several studies finding that more menthan women have died from COVID-19, the life expectancy gap couldwiden further from here.
Women not only need their pensions to last longer, they alsogenerally have smaller pension pots to use during these extra yearsof life. We already know that women typically retire with one-fifthof the pension wealth of men.2 New analysis from theCentre for Economics and Business Research found that, when lifeexpectancy is taken into account, the gender pensions gap could beas much as 108,130 for single women, and 186,120 forwomen who are married or in a relationship.3
Because they tend to live longer, women are more likely to endup in single-person households later in life. This could addfurther to their financial pressures because it can be much moreexpensive to run a household of one, covering all bills alone.
Adding to this, the State Pension age is rising, which meansmany people who will rely on this government payment will have towork longer before they can claim it. Plus, there's noguarantee your health will support you working into your lateryears.
Some women may have taken their first job at 16. If you'replanning on working until your late 60s or early 70s, that's alot of years in the workforce - you might well be feeling burnt outor struggling with health issues. As early as your mid-40s or early50s, you could be suffering from symptoms of the menopause, such as'brain fog', which can make it tough for some women tocontinue working at the pace they once did.
You may want to drop to part-time hours or get a job with lessresponsibility to take some of the pressure off, even if it justfor a few years. But will you be able to afford it?
For women in same-sex relationships, they may think that theirjoint longevity will give them a long and happy retirementtogether. But in fact they could face a triple whammy ofchallenges: both partners might take a period of maternity leavethat could impact their earning power and pension contributions,both may need to work longer, and both may suffer from healthconditions over their long lives.
Luckily, there are things all women can do to increase yourchances of a financially secure life, however long you live. If youdo nothing else, have a think about what you want your future tolook like. Do an appraisal of all your long-term savings plans,rounding up any small savings pots you may have forgotten aboutover time. Sit down and have a chat with a financial adviser to seehow things are actually looking for your retirement years. Takinginto account the money you've already saved, and your capacityto save over the coming years, an adviser can model a likelyoutcome.
You may find that you can retire sooner than you think or canslow down your working pace as you near retirement if you come upwith a sensible plan now. Take charge today and speak to your St.James's Place Partner for help with your finances.
Footnotes
1. ONS life expectancy calculator, accessed 7 September2020
2. Securing the Financial Future of the Next Generation,Insuring Women's Futures and Chartered Insurance Institute,2018
3. Centre for Economics and Business Research, September2020
The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.
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