Don’t let part-time work lead to a part-time pension
Balancing paid employment with life’s other responsibilities is a very personal decision for both women and men, whether working full-time, part-time or not at all. Matt Rider, CFO of Aegon, explores the long-term financial and future retirement-related risks of doing so but asks: are we all really considering this?
In anticipation of International Women’s Day, 8th March, I’ve been thinking a bit about disparities between women and men in their preparedness for retirement. Despite the fact that the proportion of women and men with university degrees is now almost the same (58% compared to 60%, respectively), an alarming pattern emerges in terms of how women and men participate in the workforce.
Globally, among people who are working, women are twice as likely as men to work part-time. Here in the Netherlands, where I live and work, half of women who are employed indicate that they work part-time. More than a third of women in Australia, Japan and the UK are doing the same.
Working part-time is often a way to balance employment with family responsibilities such as caring for children or aging parents – unpaid yet invaluable tasks which still predominantly fall to women. Many people, both women and men, will at some point in their careers face a major decision about whether to leave the workforce, continue working full-time or scale back to part-time employment. These decisions have implications not only for the here and now, but also for the future. For example, when a woman leaves the workforce, even temporarily, it may be difficult for her to return if she has not worked for a while, especially in a position similar to when she left.
Lower earnings today can impact financial security tomorrow
Clearly, the decision to work part-time will have an immediate impact on your wallet. However, it may not be widely understood just how significant that difference can be. With regards to women, we found that in 15 countries surveyed the median personal income of a woman working part-time is nearly 30% less (around US$15,700 compared to almost US$21,800) than her full-time colleague. Earning less also inhibits flexibility and resilience in budgeting for daily necessities and – equally as important – hampers her potential to save for retirement.
Reduced access to workplace retirement plans
Employers often offer employee benefits including opportunities to save for retirement through payroll deduction. In many countries, workers’ retirement savings are tax-advantaged and matched by contributions from employers. According to our survey’s findings, women workers expect almost one-quarter of their retirement income to come from such retirement savings plans. However – all too often – part-time workers are not offered these benefits, thereby leading to a big gap in the income a woman can expect to have in retirement. In our survey, we found that only 38% of women working part-time say their employer offers access to a retirement plan with or without an employer contribution – this puts them at a distinct disadvantage compared to the almost half of women working full-time.
This is only compounded by the fact that less than one-in-ten women working part-time say they have a written plan for their future retirement, and just over three-in-ten say they are always saving for retirement. No doubt about it: it is difficult to save for the future when you are trying to make ends meet. However, there are three golden rules when it comes to preparing for retirement regardless of how much you can afford to save: start early, save habitually, and develop a written plan.
Less access to training can impede future employability
Almost every day, we read in the news about advances in technology and how they are changing the way we work. To avoid being left behind, we all need to keep our skills up-to-date, but women who work part-time say they are less likely to be offered training opportunities compared to their full-time counterparts (41% compared to 48%). In light of this, the decision to work part-time not only has immediate and future financial consequences: it also puts women at risk of decreasing their employability.
The theme of this year’s International Women’s Day is #PressforProgress and, to that end, I offer this call to action for women (and men) who are working part-time and to employers: let’s collectively reduce the risk that anyone is left behind in preparing for their retirement.
Working part-time may give some women the feeling that they are in a weaker position to negotiate a raise, ask for a promotion or receive training. As difficult as it is for all of us, I would say that it is important to ask for what you feel you deserve. If you are interested in working more hours, or taking on more responsibility, talk to your employer. Increasingly, employers are open to flexible working, or working from home at least partially.
Invest in yourself and ask your employer to do the same. In this ever-changing job market, seek out opportunities – in the workplace and on your own – to keep your skills up-to-date and to safeguard your financial future.
Matt Rider is CFO of Aegon, the international asset management, insurance and pensions company. On International Women’s Day, 8th March, Matt will be "shadowed" by a woman from Young Aegon. Matt is the corporate sponsor for Aegon’s diversity and inclusion community, Aegon Proud.
Read Chapter 22: Gender, health and labour force participation taken from the OECD report The Pursuit of Gender Equality: An Uphill Battle