Retirement for many conjures images of leisure, relaxation, and pursuing passions. But for a significant number of individuals, especially women, retirement is shadowed by a harsh reality: pension poverty. This isn’t just a challenge; it’s a hidden crisis that forces many into unexpected paths, including entrepreneurship, simply to make ends meet.

Let’s delve into why this issue is so prevalent, particularly for women, and what it means for their later lives.

The Alarming Reality: A Gendered Gap in Retirement Income

The statistics are stark. In the United Kingdom, a staggering 70% of older women across all social classes have no private retirement income. This isn’t a minor disparity; it’s a fundamental inequality that leaves a vast segment of the female population vulnerable in their later years.

So, why are women so much more likely to face pension poverty? The reasons are multifaceted and deeply rooted in societal structures and career trajectories:

1. Caregiving Responsibilities: Historically, and often continuing today, women disproportionately bear the burden of caregiving. Time spent outside the paid labour market looking after children, elderly relatives, or other family members means missed opportunities to contribute to pension schemes. These career breaks, while vital for families, have long-term financial repercussions.
2. Part-Time Employment: To balance work and family life, many women opt for part-time employment. While this offers flexibility, it often translates to lower overall earnings and, consequently, lower pension contributions, or sometimes none at all for private schemes.
3. Non-Payment of Private Pension Contributions: Whether due to lower wages, prioritising immediate family needs, or simply a lack of awareness or access, many women have not consistently contributed to private pension plans.
4. Reliance on Partner’s Income: There’s been a historical expectation for some women that their retirement income would be largely provided by a partner’s pension. However, life events like divorce or separation can shatter this expectation, often leaving little time to build a substantial personal pension fund later in life.
5. The Impact of Pension Reforms: While reforms aim to improve the system, some changes have inadvertently had negative effects on retirement income, further exacerbating the financial squeeze for those already on the margins.
6. Low Income from Investments: Beyond traditional employment and pensions, studies also indicate that a low income generated from other sources like dividends, interest, and rent is positively associated with an increase in venture creation among older women (Hammond & Gurley-Calvez, 2012). This suggests that for many, even passive income streams aren’t enough to sustain them in retirement, pushing them towards active business endeavours.

The Rise of the “Reluctant Entrepreneur”

The consequence of this pension shortfall is often profound. Instead of enjoying the voluntary and leisure activities they envisioned, many women are compelled to become “reluctant entrepreneurs.” Starting a business in later life becomes a necessity-driven motivation, a means of generating income when traditional retirement funds or other investment incomes are simply insufficient.

This isn’t to say that all older women entrepreneurs are unwilling participants. As we’ve explored previously, many find immense satisfaction, autonomy, and a sense of achievement in their ventures. However, for a significant portion, the initial impetus is born out of financial insecurity rather than a pursuit of passion. It’s a pragmatic response to a lack of other viable alternatives for income generation.

What Can Be Done?

Addressing pension poverty, particularly for women, requires a multi-pronged approach:

• Increased Awareness and Education: Educating women, especially younger generations, about the importance of independent pension planning, regardless of marital status or career breaks.
• Policy Changes: Reviewing pension policies to better accommodate diverse career paths, including periods of caregiving and part-time work, ensuring these don’t lead to significant pension deficits. This includes exploring mechanisms to compensate for time out of the workforce.
• Support for Later-Life Entrepreneurship: While born of necessity for some, fostering an environment that supports older individuals, particularly women, in launching and growing businesses can turn a challenging situation into an empowering one. This includes access to funding, mentorship, and relevant training.
• Challenging Gender Pay Gaps and Discrimination: Fundamentally, addressing the root causes of lower lifetime earnings for women will naturally improve their capacity to save for retirement.

Pension poverty for women is not just a personal issue; it’s a societal one. Understanding its causes is the first step towards building a more equitable and secure future for all, ensuring that “retirement” truly means freedom, not financial struggle.