Do you know how much your home is worth? If so, do you know the value of your car or the contents of your wardrobe? According to a recent study, it’s likely that you do.
Research by Aviva reveals that 58% of respondents know the value of their property, with 63% knowing how much their television is worth. More than a third (34%) know the value of the contents of their wardrobe.
That said, 4 in every 10 respondents said they didn’t know how much their pension pot was worth, and nearly 70% of women didn’t know how much income their retirement funds could generate.
What you may not realise is that knowing the value of your pension and the income it might generate could be the first step in overcoming one of the biggest financial challenges women face.
This is the financial insecurity many women can end up enduring in retirement. Read on to discover more, and why knowing the value of your retirement fund could be vital in helping you live life to the full when you stop work.
Typically, women are likely to be worse off than men in retirement
Broadly, there are three factors that can result in women facing financial insecurity in retirement.
- The pension gender gap
Research by Scottish Widows found that a 20-year-old woman is on course to have £100,000 less in her pension pot at retirement than a man of the same age. A key reason for this is the amount of contributions made to a pension.
These are typically a percentage of your salary or income, so the less you earn, the lower the contributions.
Women are more likely to face events that negatively impact on their salary, such as looking after children, which means stopping work or taking a part-time role. As Scottish Widows points out, 75% of part-time workers are female, meaning their contributions tend to be lower.
This, in turn, could result in a lower income in retirement.
This dovetails into research by Aviva, which revealed a 40.3% gap in pension savings between men and women. This, it added, meant that women were typically £7,500 a year worse off than men in retirement.
- State Pension
Stopping work to raise a family could also mean a break in National Insurance contributions (NICs). As NICs go towards a range of state benefits, including the State Pension, this has the potential to leave women with less money in retirement.
In 2021/22, you need 35 years of NICs payments to receive a full State Pension, so having breaks in contributions could result in you not receiving the full £179.60 a week (£9,339.20 a year) benefit when you come to claim it.
Add this to smaller workplace and private pensions, and it’s easy to understand why women are at greater risk of financial insecurity later in life.
This could be aggravated further by the government’s recent suspension of the “triple lock”, which is the formula that determines annual State Pension increases in the UK. Because of the suspension, the next rise is likely to be less than anticipated, something research published in Pension Age suggests will impact women hardest as they rely on the benefit more.
A pension could be one of the most valuable assets within a marriage, and if split fairly, could help ensure the long-term financial security of both parties. That said, research by Legal & General revealed that 24% of people waive their rights to an ex-spouse’s retirement fund, even though it could deprive them of much-needed income in retirement.
If you would like more information on how to ensure you get a fair settlement in divorce, read our recent blog.
Speaking with a specialist financial planner can help
By talking to a financial professional who is experienced in helping women with their pensions, you can be assured they will fully understand your situation and know what to do to help.
A planner can confirm the value of your pension today and the income you could expect in retirement, providing options and solutions that could help you achieve your financial goals.
This could help you achieve the lifestyle you want and deserve when you retire, allowing you to fulfil your ambitions knowing you’re financially secure.
That said, this is only half the story. The other half is providing you with the confidence to understand your pension so that you can make decisions you don’t later regret.
As a Certified Financial Coach and holistic financial planner, we’ll provide empathetic coaching and communicate in clear, jargon-free language. As a result, we’ll develop a wealth strategy in conjunction with you, which will provide peace of mind and help you look forward to a brighter tomorrow.
Get in touch
As specialists in providing holistic, female-focused financial planning, we have a proven track record in helping women with their pensions, investments, and wider wealth strategy.
We’ll help you understand whether your pension will provide you with the income you need. In addition, we’ll provide options in an understandable way that will help you reach your ambitions.
Please call us on 0116 262 1414 to find out more.
This article is for information only. Please do not act based on anything you might read in this article until you have sought professional advice.