Menopause: the ‘hidden tax’ on your pension

For about two years, I thought I was relatively free of menopausal symptoms.

That increasingly painful ache in my hip? Must have overdone it on my run…

The quiet, but ever-present anxiety? Surely that’s normal. I’m a mum with two children at school, a full-time job and trying to be everything to everyone…

Putting on weight? Let’s chalk that up to middle aged spread…

Crying when I didn’t used to at things? I’ve never been the same since I had kids…

Fuzzy thoughts? Baby brain can last a long time, right…?

A little hot at nights? Nothing compared to some…

It wasn’t until my glasses nearly slid clean off my nose at a meeting at work in what was my first monumental, public, daytime hot flush - that I decided it was time for action. Life’s complicated enough as it is, without having to throw embarrassment and humiliation into the mix.

Two weeks later, I was on HRT. Two months later, I was close to being back to the person I’d almost forgotten existed. And every day I feel a little more like my old (younger) self.

But not everyone’s as lucky as me. As our latest Women and Money study shows¹, the menopause has the potential not just to hit you with physical and mental symptoms, it has the power to affect your earnings potential and your pension too.

Women and menopause - the cold hard facts

Nearly 8 out of 10 women go through the menopause while they’re still working² with many forced to take a long time off work. And that poses a significant threat to their long-term financial security.

^{Source: Based on a survey of 2,000 UK adults conducted by Opinium Research and commissioned by Fidelity International between 14-27 May 2024.}

Our research also showed that 60% of women have taken career breaks at some point in their lives, compared to only 43% of men. These career breaks are linked to childcare responsibilities (23%), health-related issues (22%), spending time as a homemaker (17%), and taking time out to look after older family members (9%).

The cost of taking time off due to menopause

Based on the Office for National Statistics’ average earnings figure of £28,765⁴ and adjusting for inflation and investment growth, our calculations show the average pension pot for a woman at retirement (aged 65) is £359,380. This assumes an 8% contribution of earnings into a pension from the age of 25 without any breaks.³

This figure drops dramatically for women who take career breaks later in their career due to menopause symptoms.

Our analysis shows that if you’re 51 - the average age at which menopause symptoms typically begin, earning an average salary of £28,765- you could see your pension pot fall by over £18,000 if you take a one-year career break and by over £36,000 if you take a two-year career break because of your symptoms.

If you need a longer break – let’s say five years, which is not unheard of - to manage your menopause symptoms, your pension could potentially be a massive £86,139 out of pocket.

It’s effectively a tax on menopausal women. You can see the impact menopause symptoms could have on your pension pot if you had to take time away from work due to them below.

^{Source: Fidelity International analysed ONS data on women’s earnings to calculate potential impact on retirement pots, assuming a 40-year investment period (age 25-65) with 4.25% investment growth and 2% inflation. Fidelity calculated, assuming a monthly contribution of 8% in line with auto-enrolment.}

Our research also shows that even after returning to work, women face additional challenges in recovering from these financial shortfalls. 27% of men say they could increase their savings after re-entering the workforce, while only 13% of women were able to do the same. In fact, 17% of women resumed saving and investing at the same level - or even less - after returning to work, which just makes their ability to rebuild their retirement savings even worse.

 Hope for the best, prepare for the worst

Of course, there are no givens when it comes to the menopause. You may be completely unaffected. Or you may not. But where’s the harm in preparing for the worst, and hoping for the best? This way, no matter what the future holds, you’ll at least be able to face it with more confidence - from a financial perspective at least.

Little changes can make a big difference

If you need to take a one-year break at 51 due to your symptoms, why not think about increasing your pension contributions by 1%? Based on our calculations below, you could see your pension pot rise to £359,608 - over £23,000 more than a woman paying in the minimum 8% without a career break, and over £42,000 more than a woman who takes a one-year career break and continues to pay the average 8% in pension contributions. 

^{Source: Fidelity International analysed ONS data on women’s earnings to calculate potential impact on retirement pots, assuming a 40-year investment period (age 25-65) with 4.25% investment growth and 2% inflation. Fidelity calculated, assuming a monthly contribution of 8% in line with auto-enrolment.}

And make sure you max out on any company pension contributions that are on offer - after a while you probably won’t even notice the money coming out, as it’s taken at source.

If you get a pay rise or bonus, you may also want to think about adding this to your pension pot - even contributing some of it can help in the long run.

And think about combining your pensions if you’ve collected a few in your working career. Bringing them together could make them easier to manage. It’s important to understand that pension transfers are a complex area and may not be suitable for everyone. Learn more about transferring your pension here.

Managing the menopause is hard enough as it is. Taking control of your finances really can help you feel better about the future. And small sacrifices now will almost certainly benefit you further down the line.

Source:

¹ Research was conducted by Opinium Research commissioned by Fidelity International. The survey is based on responses of 2,000 UK adults and was carried out between 14th and 27th May 2024.
² Menopause transition: effects on women’s economic participation - GOV.UK 07.2017.
³ In April 2019 the minimum contributions to auto-enrolment workplace pensions were raised to 8% of earnings, including what the employer puts in and tax relief from the government.
⁴ Office for National Statistics 1.11.2023.