Financial Planning for Women
                                         May 2006

Financial planning for women
by Simonne Gnessen, financial planner*

Up to 4.5 million working women do not save enough for retirement; and the same number again are not saving at all.

Even so, women consider financial security as one of their main priorities in life, and many of them are disadvantaged when it comes to achieving this goal. Even in today’s climate, where the sexes are meant to be equal, the Women and Work Commission still reports that women are on average earning less than men. This means that women need to save a bigger proportion of their income just to achieve the same retirement pot as men. 

Their earning power often also takes a hit if they decide to have children or take on other caring responsibilities, which affects the size of their pension too. And because women tend to live longer, this puts even more pressure on them to save more than men to secure their financial future.

According to the Association of British Insurers (ABI), 9 million women are falling into a gender pensions gap. Their report focused on women and retirement in The Gender Pensions Gap - encouraging women to save for retirement. Frighteningly, it shows that many women are at serious risk of facing poverty in retirement.

Joanne Segars, Head of Pensions and Savings at the ABI, has highlighted that the pressures on women today are immense. “We are less likely to be in employment, we tend to have lower wages and we are more likely to spend our disposable income on our children.” She stresses that increased pension saving is vital if women are to have a decent income in retirement.

The result of all of this is that women have to work for longer. According to the Office of National Statistics, the proportion of women in their fifties in employment increased from around 59 % in early 1993 to a high of 67 % in winter 2003/4.

The Department of Work and Pensions (DWP) warns that many women also miss out on a full state pension because they earn too little or take time off work to look after children or relatives. Added to that, women are less likely than men to have a private pension. The Pensions Minister Stephen Timms told BBC Radio4 that the current state pension system is unfair to women. "Thirty % of women reach state pension age at the moment on a full basic state pension, compared to over 80 % of men." If you do not have the full number of ‘qualifying years’, the pension you receive from the state will be reduced accordingly.

What you should do:

• It’s a good idea to get a forecast of your state pension, to check if you’re up to date with your national insurance contributions. This means you won’t be faced with a nasty surprise in the future, and it gives you a chance to top up your state pension by paying voluntary contributions. You can get a forecast from the Pensions Service (part of the DWP) via the following link: http://www.thepensionservice.gov.uk/atoz/atozdetailed/rpforecast.asp

• The first step of successful financial planning is to identify your personal goals. You need to know what you want to achieve, and by when. Get help to identify and plan for these goals if necessary. When looking for advice on your finances, make sure you can talk to someone who will listen to you, someone you can trust, and who explains things, clearly, without jargon.

• It’s crucial that women make financial plans for their future, not only to ensure an adequate income in retirement, but also to protect them against the risks of a breakdown of a relationship. A key issue that affects women is divorce. As well as household bills taking up a larger proportion of household bills as a single parent, women are more likely to bear the brunt of the pressure of childcare. This has an obvious impact on increasing their outgoings as well as potentially reducing their earnings capacity.
  
  *Simonne Gnessen has been advising individuals on their finances for over 15 years and is a trained and qualified independent financial adviser. She is also a certified life coach and is qualified to teach further education to adults.
  
  Simonne has experience of advising woman while working as an independent financial adviser for Fiona Price & Partners, which specialised in advising women on personal finance. In April 2002, Simonne set up a financial coaching service - Wise Monkey Financial Coaching - to provide an alternative to traditional financial advice. No financial products are sold; instead, Simonne aims to educate people on the subject of money, as well as providing guidance and support on any money matter.
  You can find out more about the way she works by visiting her website - www.financial-coaching.co.uk . You can also contact Simonne on 01273 691223 or simonne@financial-coaching.co.uk  

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