With International Women’s Day just around the corner, why not take the opportunity to put a bit of shape on your savings, retirement plan and protection cover?
After all, it’s something not enough of us are doing.
“An awful lot of women we deal with on a day-to-day basis are just so busy, they’re trying to keep a household together and simply don’t have the time,” says Carol Brick, managing director of HerMoney, a financial advisory service for professional women, adding that she doesn’t think women, in general, are taking adequate care of their finances.
“I think that women need to reach out more, and seek financial advice,” she says.
So, to get you started on that road, here are a couple of small steps you might consider.
Put yourself first.
Forget about your employer, or your boyfriend, or your husband, or your girlfriend, or children, or parents. If you want to maximise your chances of a healthy financial future, it’s time to look in the mirror.
While life may be what happens when you’re busy making other plans, wouldn’t it be good to have a couple of plans anyway? You cannot predict what life may have in store for you, but you can prepare for certain eventualities.
Forget about depending on someone else, or some event happening, to provide for you. And if you’re a stay-at-home mum, don’t think this doesn’t apply to you. The household, rather than your partner, has an income, and this should help provide and protect for you, too.
“Not enough women are looking after themselves. You need to try your best to control your own money situation and don’t rely on someone else to do it for you,” Brick advises, adding that, unfortunately, she deals with a number of professional women going through legal separation and divorce.
“It’s only then they realise how important it would have been to have had more of a handful on their finances,” she says.
Figuring out where you stand, or getting some “financial counselling”, as Brick puts it, doesn’t take forever.
“It only takes a week or two for women to engage properly and sort their affairs out,” she says.
Engage with your pension
We earn less and we live longer. Irish women typically retire on incomes that are more than 30 per cent lower than their male counterparts – if a man retires on an annual income of €30,000, a woman can expect to have an income of a bit less than €20,000 by comparison. And while there are obvious factors at play here, such as more time out of the workforce, there is still plenty of room for improvement. In Denmark, for example, the gender pension gap is less than 10 per cent.
Part of the problem is that women are less likely to have a pension themselves. Figures from Standard Life show that just one-in-three women owns a pension compared with 55 per cent of men. Even when they do have a pension, they may not be putting in enough. That same survey shows that while the average woman wants to retire on a pension of €637 a week, she has saved an average of just €52 a week.
If you are this “average woman”, what should you do?
“At the end of the day what you have to think about is to make sure there’s a pot there when you retire,” says Brick.
First things first, figure out your entitlement to a State pension. It has been estimated that it would cost you of the order of about €250,000 to replicate the benefits of this pension – and you may be entitled to it all on the back of PRSI contributions over your working life.
However, women are less likely to qualify for a full pension, now worth €238.30 a week, due to their sometimes fractured relationship with employment. But there are steps you can take to boost your entitlement.
After all, there are quirks in the system – if you work, for example, just four hours a week in a minimum-wage job you’ll qualify for a full State pension, but if you work full-time for just five weeks of the year, you’ll only get a reduced rate. Why not make the quirks work to suit your interests?
Moreover, if you’re self-employed and earning less than €5,000 a year, and are therefore exempt from paying PRSI, by making a voluntary PRSI contribution of €500 a year you could get yourself a full State pension.”
A recent amendment to the State pensions regime, ostensibly introduced to aid the 36,000 people – close to 66 per cent of whom are women – improve their pension entitlements, may also help you get a larger pension. You can read more here: www.irishtimes.com/business/personal-finance/q-a-what-do-reforms-of-the-state-contributory-pension-mean-1.3367467.
To figure out where you stand, get a copy of your social insurance contributions record from the Department of Social Protection.
Secondly, if you do have a private pension, do you know how much is in it? And how much of an income this will offer you in retirement? Could you afford to contribute a little more? Remember, contributions are eligible for tax relief at up to 40 per cent, so take out that annual pensions statement and do the sums.
Finally, if you don’t have a private pension but would like to, get moving.
“The sooner the better – always take the pension out now rather than tomorrow,” advises Brick. “Act now to take a handle on your finances and take advantage of that tax relief.”
Review your protection
If you die, get sick, lose your job, become incapacitated, what will you do? What will your family do? Do you know? Figures show that fewer women than men typically have adequate life cover – even though stay-at-home parents also need protection.
“We can actually prove that any of our females who haven’t worked in a while, their salary is worth in the region of €40,000 to €50,000 a year,” says Brick, pointing to the costs of hiring a childminder, housekeeper etc.
Many employers will offer death in service benefit, or income protection in the event of long-term illnesses – so find out if this covers you, and if it doesn’t, think about taking out a policy yourself.
Ask for a raise
Remember that famous comment from Microsoft chief executive Satya Nadella back in 2014, that when it comes to pay rises, women should just keep quiet and “keep faith” that the “system” will reward them as it should?
Well, evidence suggests that the “system” isn’t rewarding them as it should. While women who take time out of the workforce might understandably earn a certain amount less than men over their lifetimes, the gap is far greater than might be reasonably expected.
Indeed, the most recent figures from the Central Statistics Office shows that women are paid 14 per cent less than men, and that the gap is widening. Moreover, the gap is worse in certain industries; Royal Bank of Scotland, for example, has disclosed that its pay gap is 37 per cent. Rather than wait to be rewarded take a step forward and ask.
Start taking a (bit of a) risk
Women are typically conservative when it comes to managing the family finances, and in many cases research has shown that they will outperform men over the long-term due to this considered approach.
However, taking on too little risk can be as problematic as taking on too much, particularly when it comes to saving over the long-term, such as in a pension.
So if you still favour deposit accounts for all your savings, should you consider investing in the markets a little bit? No, we’re not suggesting remortgaging the house, or putting all your money in bitcoin or risky leveraged products.
Instead, allocate a certain proportion of your savings, if you can afford it, to slightly riskier products.
As Brick notes, women may be “slower to engage in that area”, but once they do they’re better at it. “We’ve seen that.”
If you had money with Rabodirect, for example, and are now looking for a new home for it, could you afford for some of it to go into a slightly riskier product? The options are plentiful; exchange-traded funds, shares, property reits, life-wrapped regular savings products.
In addition to potentially greater returns, the other advantage of getting a little bit of investment nous is that when it comes time for retirement, you should be able to get yourself a better income by looking out for lower charges and better returns.
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STARTING ON THE PENSION JOURNEY
It was a fortuitous – and ultimately financially beneficial – booking for Kerry business woman Antoinette Butler. The owner of The Butler Centre, Listowel’s meeting and business centre, was hosting a financial advice seminar for women earlier this year, and happened to listen in on the presentations.
A mother of four children aged between 10 and 22, Butler had worked as a public sector worker for much of her life, but started working for herself around 2012, subsequently resigning from her job and acquiring the old National Irish Bank in the town in 2016 to launch a new business.
Busy rearing four children, pensions were not on her mind, but listening to local financial adviser Norma O’Neill Collins, of Fealeside Financial Services, was illuminating.
“It made me aware – time is moving on and I haven’t done anything for myself,” she says, adding that taking care of her family “takes up mind space” and “you do neglect yourself – women neglect themselves”.
It’s a story that will resonate with many women.
“It gave me a bit of a wake-up call,” she says. “You don’t want to be a burden on your children, and none of us know whether we’ll be healthy in our old age.”
Fortified by what she had learned, Butler subsequently met with O’Neill Collins for advice, and is now invested in a number of funds, including Standard Life’s Myfolio Market III fund and the European smaller companies fund – and has become so engaged with her retirement planning that she even happily lists off the returns of the funds.
Overall, since taking action with her pension, Butler says she is “much happier”.
“I’m on the right road to make sure I’m not going to be scrimping and saving after a lifetime of hard work”.
