Embrace equity in retirement planning
LAST Wednesday, March 8, was recognised as International Women’s Day and the theme was ‘Embrace Equity’.
Both genders globally highlighted and celebrated the achievements of women, but it is also an opportunity for women to be more informed, and financial literacy is a key area that should not escape the focus of our women. The elderly are particularly vulnerable and at risk of old age poverty. There was a time when much emphasis was placed on equal rights but today we are faced with the right to equity.
Equality speaks to everyone being given the same access to opportunities and resources, whereas equity identifies that everyone has different circumstances, and therefore resources should be allocated according to individual or group’s needs in order for everyone to achieve the same outcome. Equality is displayed when everyone is provided with a stairway to take them to the same destination, but in order to have equity the individual who is in a wheelchair needs the use of a ramp to arrive at the same goal. Equity would, therefore, remedy the imbalance in the social system.
There is a famous quote that says: “Equality is giving everyone a shoe, but equity is giving everyone a shoe that fits.” With women living longer than men, the prevailing pay gap between both genders makes women more susceptible to poverty during retirement. In Jamaica, if companies allow more women to stay in the workplace until 65, instead of 60 as is now the case in several firms, the longer stay in the workforce would enable them to earn, save and invest more and accumulate a bigger nest egg for retirement.
The pandemic created an opportunity for women to save and learn more about financial matters, and so more women are investing.
Though women are represented across industries, they are under-represented in fields such as engineering, computer science, and physical science. More women are in low-paying jobs and are more likely than men to be supporting children. In some cases, men are earning more than women for doing the same jobs. Additionally, women are likely to be caregivers for elderly family members. Some women, meanwhile, opt for early retirement to make it more affordable to care for elderly parents as they can ill-afford to pay caregivers to take care of dependent parents. It is, therefore, very important for social systems to be in place to create equity.
Policy changes
There are social policy changes that the authorities can make to create equity. Employer-sponsored defined contribution pension plans should allow part-time workers to make pension contributions. This would increase the number of workers, particularly women, who can contribute to a pension plan. Automatic enrolment of all employees (permanent and contract workers) in a defined contribution pension plan such as an approved personal pension (ARP) plan can also help women to have equity in retirement. These individual pension plans are portable and transferable, so when employees change jobs continuous contributions can be made. Another benefit for employees is that vesting is immediate. A periodic increase in the minimum wage would also help more women in the low-income bracket to have liveable wages and save towards retirement. With regard to paternity and maternity leave in Jamaica, there is a disparity in benefits in the private and public sectors. The Government has recently mandated three months of maternity leave with pay as a benefit to employees in the public sector, while women in the public sector are still allowed the three months, but only two months with pay. Paternity leave is now a mandatory benefit for men in the public sector but isn’t mandatory in the private sector. A policy change needs to be considered that creates equity in both the private and public sectors regarding maternity and paternity leave. All earnings are important in planning for retirement, as women of childbearing age may go on maternity leave more than once in their careers.
Workplace changes
Some employers in the public sector provide health and wellness support for employees. But with more females with caregiving responsibilities, employers can offer flexible work hours, work-from-home options, counselling, and other support services. It’s an investment in human capital and the community. Research shows that women have longer career breaks than men. This impacts their earning and ability to save for a comfortable retirement.
Personal responsibility
Women should start saving and investing early regardless of income. A professional and expert financial advisor can help. I had an interesting meeting with a retiree and her daughter recently. Her daughter has already invested in an education plan even though she has not yet started a family. I do recommend that it’s best to invest early before childbearing begins. Time may be the only resource that women can leverage to their advantage by putting their money to work early, saving, and investing regularly even if the amounts are small.
Let time and compound interest work for you. Embrace equity — don’t be left behind.
Grace G McLean is Financial advisor at BPM Financial Limited. Contact her at gmclean@bpmfinancial.com or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at livingaboveself@gmail.com