Why would a woman settle for a smaller pension fund?
They shouldn’t….however in reality that is exactly what is happening in Ireland, with a potential gap emerging between men’s and women’s pensions of around 22%!
As people live longer, state benefits like the public pension cannot be trusted into the future, we’re relying more on personal and employer pensions now and this will only increase. Women in Ireland, on average, live five years longer than men (according to the CSO), but they are unlikely to have built a pension as large as their male equivalents.
Why?
Key takeaways from Ireland’s gender pension gap study
Let’s take a look at the numbers in their raw form. According to research, there is an established gender pay & pension gap in Ireland, with women expected to receive around €120,000 less than men on average from their retirement funds.
The numbers get larger still when we consider individuals drawing down pensions presently. A recent survey from Irish Life found that men drew down an average of €125,000 from their pension plans alone over the previous 12 months, versus €69,000 for women.
But why exactly is there a gender pension gap in Ireland? On the surface, men and women share many similar characteristics when it comes to their pension plans:
- Women start their pension plan age 36 and men start theirs at 37.
- 48% of employed women participate in pension plans when they are made available to them compared to 47%of men.
- 57% of women are active in their pension plan when in paid employment versus 55%of men.
- Both women and men contribute on average 11% of salary to their pension plan, including AVCs, employer and employee contributions.
When we dug a little deeper, we found a few differences that ultimately contribute to the gender pension gap:
- Simply stated, men are making more money. The typical yearly salary of women is €48,000, whereas the average annual income for males is €58,000. Between the ages of 55 and 64, this gender pay gap can be as much as €20,000 per year.
- According to the European Commission, men in Ireland spend seven years more in paid employment than women. Women are the main caregivers in most Irish families (445,500 versus 9,200 males). Again, as pension contributions are mostly calculated as a percentage of pay, truly earning a wage is important to the funding process.
The gender pay gap has a major impact on retirement security, as highlighted by the report’s findings of pension inequality. The disparity in pension pots is further emphasized by the fact that women in Ireland live longer on average – 83 years is the typical life expectancy for females compared to 78 years for males – implying that their smaller pensions will have to last them much longer!
Women in Ireland typically retire at the age of 66, and for some women, preparing for a single retirement – particularly one without a partner or spouse to split financial responsibilities – may be complicated. When retirement approaches head-on, having a financial plan is an important element of financial stability and independence.
So what can woman do about it?
Here are three tips women can use to plan and prepare for a peaceful, financially sound retirement.
Tip #1: Have a Financial Plan
According to a 2020 research, 51% of unmarried women have not saved for retirement. In comparison, that percentage falls to 24% for married ladies.
You can expect to spend 10, 20, or even 30 years in retirement, having pensions savings is critical.
What is your living expense number in retirement?
Saving for retirement may be more difficult if you live on a single income. Creating a financial game plan with enough of time to prepare can assist you in increasing your retirement savings and likelihood of financial success.
Tip #2: Prepare For Long-Term Care
In the next decade, nearly every person turning 65 will require some sort of long-term care services and support.
It should also be kept in mind that, depending on your situation and needs, permanent-disability insurance may help to cover these expenses. Even if you have family or friends who can assist you physically and financially, long-term sickness or injury might necessitate assistance beyond what they can provide physically and financially.
What kind of assistance will you need and who will pay for it? Assisted living, in particular, may be quite pricey.
Tip #3: Build a Network of Friends and Acquaintances
You may get bored or lonely after you retire, so making new friends and acquaintances is a wonderful way to discover new activities and relationships. In fact, research has shown that having close friends can actually help you live longer.
Some ways to build new friends and acquaintances could include:
- Attending local events
- Starting a new hobby or interest
- Volunteering
- Joining a walking or exercising group
Retirement planning can be difficult enough as it is, but this can substantially escalate for women. With the right planning, however, you can create a stronger future for yourself.
If you are a woman in Ireland who is nearing retirement and feeling overwhelmed, Gallivan Financial can assist you in creating a sound financial plan. We have extensive experience in helping women prepare for a comfortable retirement, and we are here to help you every step of the way.
Don’t go through retirement alone – contact us today via info@gallivanfinancial.ie