Women risk missing out on around £30,000 in pension savings because of the impact that going through the menopause can have on their finances, according to research.
More than half of women (59%) will take time out of the workplace because they are severely affected by menopause symptoms, the Newson Health clinic found. A woman with an average-sized pension in her 40s could lose out on around £1,750 in pension contributions if she took eight months off work, which the clinic says is the typical amount of work leave taken by women who suffer severe menopausal symptoms.
If a woman reduced her working hours until she reached retirement age, she could find her pension reduced in value by more than £32,000, or the equivalent of more than a year’s average salary, according to Newson’s research.
The average age for a woman to have gone through the menopause is 51, but symptoms can begin years or even decades earlier, during what’s known as the perimenopause. Symptoms can be wide-ranging, and may include anxiety, brain fog, depression, memory problems, joint pain, hot flushes and fatigue. These can be extremely debilitating, and potentially cause women to struggle at work, or even have to give up their jobs altogether.
Experts are calling for more recognition about the impact the menopause and the years leading up to this can have on the lives of women and their finances.
The menopause and work
One in five women have reduced their hours because of menopausal symptoms, the Newson Health clinic found.
Separate research by AJ Bell Money Matters found that a fifth of women say the menopause has impacted their confidence at work, while a further 12% say their performance suffered. Many more are forced to use holiday, sick days or even unpaid leave while they go through the menopause to help them manage their symptoms.
Helena Morrissey, founding ambassador of AJ Bell Money Matters, said: “Having recently gone through the menopause, I found the findings from our research on this phase in a woman’s life totally relatable. The physical, mental and psychological symptoms (a daunting 34 possibilities) are now – thankfully – more widely talked about. But those symptoms can in turn have a significant adverse impact on our career and finances – something that’s much less discussed or understood.
“The onset of my own menopause unhelpfully coincided with both the Covid pandemic and a career switch, from a secure salaried full-time position to board roles. Although the timing of my ‘change’ was almost comically bad, I know I’m one of the lucky ones, making it through to the other side in one piece, financially and in body, mind and spirit. But the experience was disconcerting and showed me how nerve-wracking the menopause can be – and how damaging for our family finances.”
Women are already likely to earn less than men during the course of their careers. However, the gender pay gap remains at its widest for Britain’s oldest workers, according to analysis by Rest Less. It examined Office for National Statistics data and found that in 2022, the biggest difference in full-time pay was between men and women in their 50s. Women aged 50-59 earned an average salary of £30,603. This is £7,274 less than men in the same age group, who earned an average annual salary of £37,877.
The menopause and pensions
Women who have either worked part-time, reduced their hours, or given up work altogether because of symptoms related to the menopause may not have considered the impact this could have on their retirement income.
According to research by Aviva, whilst 62% of those in these groups said they understood the potential effect on their pension contributions, around 37% said they didn’t think it would have much impact. Around 7.5% of those questioned admitted they didn’t know it would have an impact on their pension contributions.
Both the gender pay gap and career breaks to care for family members are behind the difference in pension sizes between men and women by the time they reach their 50s. This difference could also be attributed to the ‘menopause shortfall’, said the Newson Health clinic. Women aged between 55 and 59 have, on average, private pension savings worth around £94,000, according to latest figures from the Department for Work and Pensions (DWP). This compares to pension savings that are worth, on average, a third more for men in the same age group, at £145,000.
A separate report by Royal London found that women are more likely than men to reduce their working hours, or leave work altogether in their 50s, which is typically the time when they are earning the most.
On average, the research found that the menopause could reduce the amount women have in their pensions by £63,000 by the time they reach retirement age because they reduce their hours which, in turn, limits the amount they can save. If women stop working altogether, they could end up with eye-watering £126,00 less in their pensions than they’d have if they’d worked until State Pension age.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said more support is needed for women when it comes to working through the menopause. She said: “Given many women have already had to take time off work to look after children then leaving work early due to menopause can impact them even further.”
If you’re struggling, she stressed that it’s really important to talk to your employer and see what support is on offer as this can go a long way towards keeping you in the workforce and contributing to a pension for longer.
How to financially prepare for the menopause
Every woman’s experience of menopause is different, and hopefully your symptoms will be mild, or not severe enough to impact on your working life and financial situation. However, plenty of women do find that their performance at work suffers, so it may be wise to take some steps to ensure your finances stay on track.
Take control of your finances
If you’ve started to suffer with perimenopause symptoms, now can be a good time to work on making even small changes to the way you manage your finances. Simple tasks such as drawing up a basic budget and starting to save a little each month can make a big difference to your future retirement income.
Ideally, tackle any debts first, as there’s no point in trying to save money if you’re struggling to pay debts. Once you’ve done this, you should aim to build up an emergency savings fund equivalent to around three to six months’ worth if income is recommended by experts. You can find out more about ways to take control of your finances in our articles 11 simple steps to better money management and How to build an emergency fund.
Find old pensions and trace lost pensions
Most of us work for a number of different employers over the years, or move home several times, so there’s a risk we might have lost track of a pension or two.
Ms Morrissey from Hargreaves Lansdown said: “Make sure you have an overarching view of all your pensions. As we move between jobs we are likely to lose track of pensions and we risk missing out on thousands of pounds towards our pension income – this could have a transformative effect. Check your paperwork and make sure you have up to date contact details for all pensions and if you don’t, get in contact with the government’s pension tracing service.
“You will need either the name of your employer or the name of the pension provider. The service can’t tell you if you have a pension with them but they can give you contact details so you can find out for yourself.”
Read more about how to track down old or lost pensions in our article How to find old pensions and trace lost pensions.
Combine your pensions
Once you’ve got the details of all your pension pots, combining these into a single pension plan can make managing your money more straightforward. This way, you’ll only have one pension statement to review each year and one set of investments to keep an eye on. You might also be able to reduce the charges you pay. However, before you start consolidating your pensions, it’s vital to check that you aren’t going to get stung by exit fees or potentially miss out on important benefits such as guaranteed annuity rates. Read more in our article Should I consolidate my pensions?
If you’re moving a defined contribution pension to another provider, you’ll need to get in touch with your current pension providers and check that they will allow you to transfer, and find out how much moving your pension is going to cost. You’ll then need to contact the provider you want to move your plans over to and check that they will allow you to transfer. Read more in our article How to transfer your pensions.
If you want personal recommendations about where to transfer your pensions, you’ll need to seek professional financial advice. You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guides on How to find the right financial advisor for you or How to get advice on your pension.
If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.
The review is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.
Consider increasing your pension contributions
While you can, you might want to think about adding a little extra to your pension if you can afford to. Rebecca O’Connor, director of public affairs at PensionBee, said: “If you come into an inheritance or bonus, then consider your pension as somewhere to put that, too.
“That’s because from age 55 (rising to 57 in 2028), you can access your 25% tax-free lump sum or start taking an income from your pension. You might not need the money right then, but the point is you can if you need to. If you put money into your pension, the contribution benefits from tax relief at your rate of income tax, giving an instant boost to what you put in, equivalent to 25% if you are a basic rate taxpayer. So if you put £1,000 into your pension, this automatically becomes £1,250.
“You don’t get instant returns like that from any other savings vehicle. Although the thing to bear in mind is unlike savings or ISAs, pension income when you come to take money out of it is taxable.”
If you’re paying into a workplace pension scheme, see if your company will pay more into your pension if you increase your contributions. Under the government’s auto-enrolment rules, you and your employer should be making a total minimum 8% monthly pension contribution if you’re earning over £10,000 a year. Read more in our article How does pension auto-enrolment work?
If you’re paying into a personal pension, such as a self-invested personal pension (SIPP), even an extra 1% a month can make a substantial difference to your retirement savings over the years, so it’s well worth seeing if you can spare a little extra money each month and pay this into your pension.
Check your State Pension entitlement
Full State Pension is currently £203.85 a week in 2023/24. However, the actual amount you’ll receive depends on your National Insurance record, so it’s worth checking whether you’re on track for the full amount.
Alistair McQueen, head of savings and retirement at Aviva, said: “The State Pension continues to represent the biggest single source of income in retirement for most people. For millions, it represents the foundation upon which all other retirement finances are built. It can also, however, be confusing.
“Different people can be eligible for different amounts of State Pension and can be eligible from different ages. Fortunately, the government provides a free personal State Pension forecast to clarify these points for you. Get yours today.”
Your State Pension forecast will give you an estimate of how much you’ll receive once you reach State Pension age. Bear in mind that the State Pension age is gradually being pushed back in line with rising life expectancy. At present, it’s set to increase to 67 by 2029, and again to 68 between 2037 and 2039. Read more in our guide How can I get a State Pension forecast?
Read more about the menopause in our articles Managing your menopause journey, 5 common symptoms of menopause and how to ease them and Hormone replacement therapy (HRT) explained.
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