Author: Melina Scheuber
Regular saving is a common practice among 79% of women, yet only 18% engage in regular investments. This statistic emerges from a J.P. Morgan study that surveyed about 4,000 women, aged 30 to 60, across ten European countries .
But why is it especially crucial for women to invest?
Longer Life Expectancy
On average, women outlive men by about four to five years . Consequently, their savings need to sustain them for a longer period.
Low Interest Rate Policy, Negative Interest Rates, and Inflation
The return from savings accounts is minimal. Interest rates for these type of accounts are close to 0%, and accounts had in the past also even negative interest rates. Inflation, currently at 1.5% in Switzerland, compounds this issue. For instance, CHF 1,000 left in a savings account from January to December would see its purchasing power reduced to CHF 985 by year’s end.
Capital markets present a viable alternative. For example, over the past 20 years, the equity index « MSCI All Country World Index » yielded an annual return of 4%, while the « Swiss Performance Index » yielded 6% (both calculated in CHF).
Gaps in Occupational Pension Provision
Factors as part-time employment, baby/career breaks, and household responsibilities often lead to reduced workloads for women, resulting in gaps in their occupational pensions. In Switzerland, the gender pension gap — the disparity in pension between men and women — stands at 37%. In practical terms, women receive, on average, CHF 20,000 less in pension annually than men. I delve into this topic more deeply in this podcast (Swiss German).
Lower Wages – Gender Pay Gap
Women’s earnings are approximately 19% lower than men’s. Of this, 56% is attributable to objective factors like job position, education, or industry. The remaining 44% remains unexplained . Salary directly affects future pension benefits; lower salaries mean reduced contributions to the pension fund and, consequently, a diminished retirement pension.
New Practices in Case of Divorce
Post-divorce, women generally work fewer hours than men, often due to childcare responsibilities, which 77% of the time primarily fall to mothers . This leads to lower pension contributions from women post-divorce.
Recently, the Federal Supreme Court ruled that decisions regarding life-defining marriages and owed child and care maintenance must be made on a case-by-case basis. Previously, women typically received maintenance payments after separation or divorce until retirement .
All these factors adversely affect women’s assets and their retirement pensions.
What Can You Do Specifically?
Develop an Interest in Financial Topics
Take personal responsibility and begin addressing pension issues early. Manage your finances independently and cultivate a healthy ‘money mindset.’ Write down any finance-related questions and set specific goals for answering them. Gradually, you’ll become more familiar with financial matters.
It’s akin to learning a new language; practice brings you ahead.
Learn About Our Pension System
This involves more than just knowing our pension system’s three-pillar structure. Understand how to interpret a pension fund statement, the insurance coverage in case of accidents or disability, considerations in case of divorce, protections for cohabiting couples, and the implications of part-time work or maternity leave.
Actively Address the Pension Gap
Inquire with your pension fund about your coverage, how it handles part-time employment, and the impact on your pension (focus on minimum income and coordination deduction in the 2nd pillar). When changing jobs, opt for an employer with a progressive pension fund. If needed, consult specialists familiar with the pension market. It’s also wise to never completely withdraw from the workforce.
Implement in Small Steps
You don’t need to master everything immediately. Start with small investment amounts and gradually build confidence. Over time, you’ll become more comfortable and increase your investment amounts.
You’re probably aware that focusing on finances is essential. With the demands of family, work, and other commitments, finding time can be challenging. Basic financial knowledge is crucial, but you don’t have to manage everything alone. Seek assistance from specialists for implementation, ensuring you’re comfortable with the process.
Take Control of Your Finances Today
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