Old age poverty is more common in women due to the fact women live longer and retire on a much smaller pension than men. A survey by Standard Life found that men were twice as well off as women in retirement. It was also found that an Irish woman was only saving enough to have a pension income of €2,000 a year.
Awareness is key to accumulating a good pension pot. Women can then anticipate what is to come and put measures in place to counter-act the problem.
In many ways pension planning is more important for women with many factors affecting their final retirement fund including earning less during their working life, more gaps in their employment history and the fact that they out-live men.
EU Commission figures have identified a gender pay gap in Ireland with men earning an average of 35% more per year, then women. This is more than likely due to the fact that more women work part time, are in lower paid jobs, have less opportunity for salary progression and are typically the home carers when it comes to children or elderly relatives which effects their working hours.
Despite the retirement challenges women face, The Irish Brokers Association found that 73% of women have very little or no understanding of pensions compared to only 55% of men. (Irish Brokers Association)
Planning ahead will limit the impact that unpaid maternity leave will have. Women should be aware of what their employer’s pension policy is in relation to maternity leave and determine if the employer is willing to continue contributions to your pension as long as you agree to pay the backdated contribution on your return to work.
The State Pension:
Women also run the risk of receiving a lower state pension. You need 520 PRSI contributions and typically 48 a year in order to qualify for the state pension. Often women find they only qualify for the smaller state pension due to taking time out to raise their family. Voluntary contributions can be made to improve or maintain their contributory pension entitlement. “Purchasing additional years is quite a cost-effective way of at least making sure you get the maximum state pension” says Jerry Moriarty of the Irish Association of Pension funds.
This is a difficult situation to be in and having a pension can add to that strain. Courts divide pensions between spouses under a Pension Adjustment Order. Pensions are complicated so expert advice is advised in order to ensure a woman can protect what is rightfully hers.
Aisling Kelly, Senior Benefit Consultant at Mercer, believes that separating spouses need to take care when it comes to Defined Benefit (DB) pensions which are based on final salary and length of service. “
“If a man or woman are going through a divorce and they see that their former spouse will get a DB pension of €50,000 per annum in 30 years’ time, they need to get some financial advice to make sure the true value of this is understood” she says. “They look at it as being worth €50,000 without realising that the multiplier for that might be 30 times” she continued.
Kelly also states that separating spouses must be aware of the implication of the Standard Fund Threshold being breached. This is set at €2 million which is the maximum allowable lifetime limit for a tax – relieved pension contributions. Contributions in excess of this are taxed at 40%, which is payable by both spouses.
It is vital that women recognise their precarious pension position and try to plan accordingly. Seek our expert pension advise today.
The views and opinions summarised in this article are those of the author The Sunday
Times in association with Davy Private.
Article Source: Gender Gaps means Smaller Pots for Women after Work