Why female entrepreneurs need to think about pensions

In Pensions Awareness Week our MD Karen Sheldon reflects on why she is so determined to ensure women entrepreneurs are thinking about their financial futures.

Like so many women I started my career in a corporate environment. I was good at what I did, I earnt the bonuses and went on the conferences and sales trips. It’s easy to take many things for granted when you work for a big organisation. Your salary drops into your bank account at the end of the month, there’s always someone to ask if you have IT problems, and you are part of a pension scheme.

Like many women when they become parents, I came to the point when working for someone else wasn’t working for me or my family and I decided to set up my own business. Not only did I learn quickly how to sort out any IT problems, I made sure to set up my own pension fund and prioritise making payments over the years of growing the business. As a pensions adviser, this was second nature to me. But I realised that for many women in the same position as me, starting their own business after a long corporate career, this wasn’t a priority.

This is why, in Pensions Awareness Week, I’m so determined to ensure that other female entrepreneurs are building pension planning into their business finances. Here’s why you – as a female entrepreneur – need to think about your pension:

Your state pension may be later and less than you think

If you were hoping that the state pension will step in and support you in your retirement, let me give you a reality check. You won’t be able to claim a state pension until well into your 60s – use the government tool here to check exactly when https://www.gov.uk/state-pension-age And it may not be as much as you think. The current state pension is £185.15 a week, assuming you have made adequate NI contributions. Whilst a good staple building block, for many it just won’t be enough to enjoy your retirement, so you will need to think about other sources of income.

Women have less in their pension funds

According to research by Legal and General earlier this year, women have significantly less in their pension pot regardless of which sector they are in.

This is particularly worrying because women are likely to live longer than men, so really should have larger pensions at the point of retirement.

Add to this, research in 2019 by Scottish Widows showed that more than a third (35%) of female entrepreneurs are saving nothing for their retirement. That’s almost 600,000 women who will have no savings to fall back on in later life. It revealed that less than half of self-employed women save the minimum recommended level for retirement.

There are many reasons for this. If we are starting a new business in our mid career, we will prioritise other financial matters before our pensions. We may find it harder to access finance, so we are more likely to self-fund our businesses. We may also be working fewer hours, to allow for caring responsibilities, so our turnover is reduced.

If we are in a relationship, our incomes may be less than our partners, and seen as less important, or simply an income for extras, such as holidays. We are more likely to prioritise putting funds into savings for our children.

All of these factors play a significant part in the funds we have available to invest in pensions.

Women think differently about money

Aside from demographic issues, attitudes towards money may also be important. The Fidelity Global Women and Money report 2021 suggests that while women’s incomes globally increased to $24 trillion in 2020, up from $20 trillion in 2018, we do not think of ourselves as investors.

Legal and General’s research showed that “women are less likely than men to feel confident managing their investments (22% of women versus 41% of men), and their savings (56% of women versus 67% of men).”

Simply put, we don’t see ourselves as investors, so we don’t invest.

We are still impacted by the pandemic and cost of living

Add to all these ongoing factors, nearly one in five women (18%) has reduced the amount of money she is saving into a pension as a direct result of the pandemic. As we face a cost of living crisis in the UK, women entrepreneurs may be tempted to reduce or completely stop their pension payments in favour of other more pressing concerns.

What is the solution?

There is a lot of work to do to ensure that women entrepreneurs have the financial future they deserve. You can’t just rely on the state pension and anything that you may have saved from their corporate career. You can start a personal pension with a relatively small amount, and there may be significant tax implications from investing, depending on the structure of your business. The key is to start, and to save regularly.

Whatever your concerns about investing in a pension, I would be really happy to talk to you about it. Please book a free initial conversation by calling the office. Because financial health is financial wealth.