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How women can close the gender pension gap

How women can close the gender pension gap

You’ve no doubt heard of the gender payment gap, where women earn less than men for the same jobs, and the life insurance gap, where people are typically underinsured. Now experts are flagging a gender pension gap — defined by the Organisation for Economic Co-operation and Development (OECD) as the difference between men’s and women’s accumulated wealth at retirement.

According to Dr Lee-Ann Steenkamp, in the Stellenbosch University “Women’s Report 2022: Women and Fiscal Policy”, South Africa’s gender pension gap is 26%, compared to a range of 10-20% in the Western world. Farzana Botha, segment manager at Sanlam Risk and Savings, says that women typically cannot afford to retire as early or as comfortably as men.

“A multitude of factors contribute to the gender pension gap, including the fact that women typically live about five years longer than men, but earn only 82% of what their male peers make for equivalent work. Closing the gender payment gap is expected to take close to 300 years,” she says. Botha adds that longevity literacy is key to empowering women to stretch their retirement incomes for longer and to prepare for higher healthcare costs.

Contributing factors to the global gender pension gap:

Issues contributing to the gender pension gap, as per the “Women’s Report 2022: Women and Fiscal Policy” include: 

  • Men are more likely to be employed than women; in 2022, close to half of all working-age women in South Africa were out of work, versus 26% of men.
  • Women are more likely to work part-time (59% of part-time employees are women), which means they earn less than full-time employees.
  • Women are still responsible for more care activities (13.3%) in their non-working time than men (6.6%). Care work is chronically undervalued and usually unpaid.
  • South Africa’s pay parity score is dismal, ranking 111th out of 146 countries.
  • Globally, women who take a year off to take care of their children earn 39% less than those who do not. A lack of affordable childcare is hugely restrictive for women the world over and inevitably has an impact on what women can afford to contribute toward retirement.
  • According to Statista, 42% of South African households are headed by women, while Stats SA reports that as many as 60% of South African households have absent fathers.

Botha adds that, according to the recent “Sanlam Money Matters — South Africans’ views and approaches towards retirement survey”, 48% of women say they are probably not saving enough towards their retirement to make their goals a reality. In fact, 26% say they cannot afford to stop working and will have to work for as long as they can.

Janice Masencamp, the head of retirement fund consulting at the employee benefits advisory firm NMG Benefits, says there are several steps women can take to improve their retirement outcomes:

Increase retirement fund contributions

The more money you can put away while you are earning, the bigger the nest egg you will have to provide financial security in your retirement years. Work through your budget to identify where you can carve out extra savings to put into your retirement fund.

Assess your expenses

“By taking a closer look at your monthly expenses, you may discover that you are overspending in certain areas or paying for services you don’t need. This can free up extra money that can be used towards your retirement savings,” Masencamp says.

Get involved in the family finances

Masencamp warns that women still often fall into the trap of leaving financial matters to their partners or spouses. “The onus is on you to find out how much money is being spent and saved, and the current state of your retirement savings,” she says.

Beat the tax burden

One of the biggest benefits of retirement planning is to structure your retirement funds in a tax-efficient manner. The more control you have over your income sources in retirement, the more likely you are to be able to reduce your tax burden. Because future tax regulations are difficult to predict, diversifying your income sources in retirement could save you a lot of money in the long term.

“Most people see retirement as a time to relax and take it easy. For women, especially, the reality is often quite different. Retirement can cause severe financial stress, especially if you have left your job before your planned retirement age or must care for an elderly or sick spouse,” Masencamp advises. DM

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