Self-Employed Women and Pensions: Closing the Gender Pension Gap

 

If you are a self-employed woman who isn’t currently investing in a pension, or doesn’t have any type of financial plan in place for later life, then this blog post is for you. In the UK there is a Gender Pension Gap, with women having smaller pensions pots than men. This is particularly worrying given that on average women live longer than men. The Gender Pension Gap exists amongst women who are employees and entrepreneurs, but as a self-employed woman, the challenges you face might be different. As a self-employed woman this is one type of monetary gap between the genders that you can actively close the gap. Keep on reading to find out why now is the time to stop making excuses and to start taking action to invest in your pension and prepare financially for retirement.

 

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SELF-EMPLOYED WOMEN AND PENSIONS: CLOSING THE GENDER PENSION GAP

 

For many business owners retirement seems a long way away and if you are a business owner then you might be thinking ‘ I love my business. I’m never going to want to stop working’. I get it. Honestly, that’s my attitude too. I can happily see myself working until I’m in my 70s or 80s. And maybe I will. But I know it is important to ensure that if I can’t work until my 70s or 80s it won’t matter as I won’t have to work in order to financially support myself.

 

So if you’ve got the attitude of I’ll work forever I want to bring two things to your attention.

 

Firstly, none of us know what is around the corner. Just because you want to work doesn’t mean you are going to be able to.

 

Secondly, if you are a service-based business owner then your business doesn’t usually have any assets. AKA as soon as you stop working the business is basically worthless.

 

Because of these two factors, it is important that you are financially preparing for later life so you can rest assured knowing that if there comes a time that you decide, or have, to retire then you can do so and still financially support yourself.

 

Now, this blog post isn’t a how-to guide on what you need to do. If you want to know how to prepare for later life as a self-employed woman then you can check out my chapter in Inspirational Investing 2023. In this book (the e-book is FREE), I walk you step-by-step through what you need to do as a self-employed woman to financially prepare for later life. To grab a copy of the book click here. 

 

 

Instead, this blog post is for those who have been putting off starting a pension. If you have been putting off starting a pension I’m here to identify and address the most common excuses head-on.

 

Before I explore the excuses there is one thing I need to clarify first. There are many ways to prepare financially for later life. Whilst in this blog post I’m talking about pensions (because that is the most common / traditional way of financially preparing for later life) I’m well aware that there are alternatives.

 

It might be that the thought of not being able to access your movie till a certain age doesn’t work for you. In that case, you might decide to look into alternatives such as investing in a stocks & shares ISA or buying a second property. As long as you have a financial plan and are actively following that plan then you’re all good. I’m just talking about pensions here as that is the most common way people financially prepare for later life.

 

SERIOUS ABOUT USING YOUR BUSINESS TO BUILD YOUR WEALTH Are you ready to stop dreaming of being a wealthy woman and instead actually be one? If so, and you want to learn how to turn your current business into a tool that really supports wealth generation let’s have a chat. Whether you want to maximise your profit as a service provider or look to scale your business instead I can help you work out a way forward. To book a call click here.

ADDRESSING THE REASONS WHY SELF-EMPLOYED WOMEN AREN’T INVESTING IN PENSIONS

Reason 1: Limited Funds

A major reason why self-employed people don’t pay into their pension is because they feel as if money is tight and they can’t ‘afford’ to contribute.

 

MY RESPONSE

I get that at the start of your business money can be tight, but if you’ve been in your business for over a year and you still don’t feel as if you have enough money in your business to start contributing in some way then you need to have a serious chat with yourself. And if you are serious about increasing your revenue and profit – I would love to help you.  You can book a discovery call here. 

 

The fact is that if you are serious about looking after yourself and your financial future you should adopt the pay yourself first attitude. For example, if right now your approach to paying yourself is to let the money come into your business, you pay off all your expenses and then you get what is left then it is highly unlikely you are ever going to feel in a place where you have enough left to invest in a pension.

 

Instead, you need to pay yourself first. That means money comes into the business, you pay yourself, and then the money that is left has to pay for everything else.

 

Now I know this might sound scary, and you do need to make sure that you don’t take more money out of the business than you are legally allowed to, but adopting this mindset will change your business. You might feel as if you won’t have enough left to pay for everything in your business. This absolutely is possible, but the reality is most people are pretty resourceful when in relation to paying others. Usually, they manage to make the money left work or bring in extra money. Whereas when that money is just for you it is a different story.

 

The reality is that if you aren’t careful 3, maybe 5, even 10 years could pass by and you still saying funds are limited and you don’t make ‘enough’ to contribute to a pension. Lifestyle creep has a real thing and it is oh so easy as you make more money in your business for that money to be spent just as quickly as it comes in.

 

So if you are serious about looking after your financial future start investing now. Even if it is a tiny amount. Decide it is a non-negotiable and you will increase your contributions over time.

 

Reason 2: Lack of Knowledge 

Another reason self-employed people don’t invest in a pension is because they don’t feel as if they have enough knowledge.

 

MY RESPONSE

I totally get that pensions may feel like a foreign language and as someone in the UK there definitely was a point where I felt I knew more about 401K and Roth IRAs then the UK’s pension system. However, there is more information, education and support out there than ever before.

 

If your excuse for not having a pension is a lack of knowledge set aside some time to learn. You run a business so you are smart enough to get your head around pensions. In reality, there aren’t too many things you need to learn in order to take starting action. You need to work out what type of pension you’d like to open, find a provider, choose what you’ll invest in and then decide what you are going to contribute.

 

Reason 3: Short-term financial goals

Another reason people say they don’t aren’t contributing to a pension is because they have other short-term financial goals.

 

MY RESPONSE

As a millennial I get it. Thinking about paying into a pension when you are still paying off your student loan and trying to save to get on the property ladder feels ridiculous. But the thing is sometimes those short-term financial goals aren’t really that short-term. If I waited until I paid off my student loan before I invested in a pension I would still have £0 in my pension. Also, when it comes to pensions, like any type of investing, there is one thing you can’t make up – TIME!

 

If you invested £1,000 and it got an average of 7% return rate then 10 years later it would be £1,967,  20 years later it would be £3,870 and 30 years it would be £7,612.

 

That is the same £1,000. You haven’t added anything to it. That is the power of compound interest. The best gift you can give yourself is time and that’s why even if you feel as if what you are contributing isn’t a lot it could still be worthwhile.

Please note that investments can fall as well as rise in value, and you could get back less money than you put in.

 

Reason 4: Irregular Income

Another reason self-employed people will use for explaining why they can’t invest in a pension is because of irregular income. This is different from not having enough money. In this scenario, it may be that you feel that some months you could make the contributions, but you worry that you wouldn’t be able to make the contributions every month.

 

MY RESPONSE

Seasonality in business is normal and as a business owner you need to learn how to manage irregularity in your revenue (I talk about it more in this blog post)

 

I’m definitely of the attitude that you need to learn how to deal with seasonality rather than being scared of it. Now it might be your business uses launches so you have massive bumper months or you have seasonality just because of what you sell or who your ideal client is. Either way, that is no excuse not to pay into a pension.

 

Firstly, if you take the attitude that contributing to your pension is a monthly expense along with everything else in your business then would you not pay Canva, your VA, your mentor or website hosting just because you had a quiet month?

 

Secondly, there are now pension providers, such as PensionBee , who understand that business owners will have highs and lows in their income, and as a result they allow you to make flexible contributions.

 

That’s it! I’ve addressed the 4 main reasons why self-employed women are not investing in pensions and are not preparing financially for retirement.

 

As I said at the beginning, unlike other monetary gaps between the genders the Gender Pension Gap is one that women can actively do something about.

 

You can make the decision to get your act in gear and could have everything up in a running in a few days.

 

The power is in your hands! Make your older self proud.

 

Don’t forget if you want more of a how-to in terms of preparing financially for later life as a self-employed woman then get your hands on a copy of Inspirational Investing 2023, which can be found by clicking here. 

 

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