Sharon Bonfield, Advice for Women Marketing Proposition Manager St James’s Place Wealth Management www.sjp.co.uk
The traditional perception of women reaching their 50s and 60s and starting to wind down by spending less time at work and more time on hobbies and relaxing is being challenged by modern society.
We are now seeing more women in this age range starting a new chapter in their working lives. Research shows the employment rate for women aged between 50 and 64 had risen to 68% in 2019, up from 53% in 20001.
Perhaps the gender pensions gap and changes to the State Pension age has meant that many older women will be working out of necessity. Many will not have saved enough for their retirement or will have faced a change of circumstances that means they can’t afford to stop working when they had originally planned.
But whether work is a result of choice or necessity, the growing number of older women remaining in the workplace has many distinct advantages.
Giving women more financial resilience and independence
Some women will continue to enjoy the career they have been in for years and see no reason to stop; others may relish the opportunity to start something new. With the mortgage paid off and childcare bills consigned to history, many older women may find that the financial pressure is off and that they can afford to do something they enjoy – or just have the time to focus more on their career. It might be the perfect time to monetize a hobby or start a new business venture. Alternatively, there is the opportunity to retrain and do something entirely different.
Carrying on earning gives women more financial resilience and independence, and that surely can’t be a bad thing? With life expectancy continuing to rise – a 65-year-old woman is now expected to live for a further 21 years2 – there’s a lot to be said for keeping the money coming in as long as you can.
Giving pension more time to grow
The longer you work, the longer you can hold off taking your pension. A deferred pension has more time to grow and, depending on your income, you can also keep making contributions. When you do eventually start taking your pension, your savings won’t need to last as long either. You may also find it makes sense to defer your State Pension in return for a higher income later on.
The benefits of working into later life aren’t just financial. Those who can carry on working often find that the right job – and the social outlet it provides – improves both their physical and their emotional wellbeing.
Why are women retiring later?
The default retirement age of 65 was scrapped in 2011, and women – and men – can stay in employment as long as they are able to, as has always been the case for the self-employed.
Employers have to be more flexible and this, coupled with the pension freedoms (which relaxed the rules around taking income from our retirement savings), means that now more than ever retirement doesn’t have to be an abrupt halt, where you are working one day and retired the next. Instead its possible to ‘glide’ into retirement, gradually and on a woman’s own terms, taking income from a pension as needs change.
Re-consider retirement planning
This new chapter in many women’s lives – whether rebooting a career, taking on a new role, retraining or setting up a new venture – is an opportunity to re-consider retirement planning.
A good regulated financial adviser will be able to work out the likely retirement income in an existing retirement plan and if things were to change in the next chapter. It’s important to look at current owned assets including property, ISAs and premium bonds and assessing whether enough National Insurance Contributions have been paid to be able to claim a full State Pension. And the value of a business should be taken into account if you are self-employed.
Once all this has been taken into account a financial advisor can assess whether you’re on course for the income you will need when you do eventually slow down, and if necessary, be able to offer advice on how to plug any gaps. With a full analysis of your financial position, the picture is often better than you imagine.
Similarly, if your change of direction is going to give your finances a welcome boost, your adviser can help you put that money to the best use and boost your financial wellbeing, both now and when you do eventually retire.
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1 Office for National Statistics, LFS: Employment rate: UK: Female: Aged 50-64: %: SA, April 2021
2 Office for National Statistics, National life tables – life expectancy in the UK: 2017 to 2019