Otegha Uwagba, founder of creative business network Women Who, described being financially literate as “a powerful thing, especially for women”.
This may at first glance seem a patronising discussion topic – there is, after all, a considerable amount of overlap in the financial advice available to men and women.
So do women really need specific advice on financial planning? Well, many of the pension products and services in the marketplace were designed by men, for men.
Fortunately, times have changed and, yes, life events can apply to both men and women.
But there are still some which happen only to women, such as pregnancy and menopause. Also, it’s statistically proven that women tend to give up work or reduce their hours to look after children and elderly or infirm family members, and even grandchildren.
Recent data from the Office for National Statistics shows the number of women aged 25-34 who are leaving the workforce to look after family has increased by 12.6% in the past year.
Women are entitled to 12 years of National Insurance (NI) credit per child, as well as carers’ NI credit for those giving up work to look after grandchildren. However, this is storing up a huge issue for the future – gaps in paying both NI and state pension contributions will result in depleted retirement pots.
Menopause matters
In her recent Channel 4 documentary Sex, Myths and the Menopause, Davina McCall revealed menopausal women are the fastest growing group of workers. A survey carried out for the programme showed nine out of 10 women feel menopause has a negative impact on their working lives. The survey also highlighted that 10% women leave work during the menopause and 14% go part time, but only 10% of employers are actively raising awareness and making simple changes to keep these people in the workforce.
So we have another factor impacting women only, which will reduce their private pension as well as their state pension. Having a smaller pension when they retire is compounded by the fact that women live on average 5.6 years longer than men.
By contrast, women are more likely than men to be diagnosed with a critical illness before the age of 65 – one in four, as opposed to one in five. It’s really important they consider critical illness cover in the event they are unable to pay bills due to ill-health.
Divorce
The emotional upheaval of divorce is frequently exacerbated by financial issues and tensions over dividing assets. While retirement plans and pensions are often key assets in any divorce decree, it’s often women – having paid less into a pension fund due to caring responsibilities or ill-health – who fare worst.
The best guidance I can give to anyone in this situation is to seek financial advice.
If you take anything away from this article it’s this – the earlier you start planning for the future the better, and decisions you make earlier on in your life will determine your quality of life later on. The Retirement Living Standards website is a good place to start.
If you’re in a couple, talk to each other about your finances. Consider the impact that having children will have on your expenses and also your career, and plan accordingly.
Plan from a tax-efficiency point of view. Claim everything you’re entitled to, including tax-free childcare.
Whether you’re male or female, you can’t plan for everything in life – but you can make the most of your finances so that when stormy seas do hit, you can find a path through.
Emma Reid is a financial adviser at north-east firm Phil Anderson Financial Services.
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