Ladies, what is your pension worth?
There are huge differences in the value of men and women’s pensions in the UK. In some regions, the gender pension gap is almost 50 per cent, meaning that some women will retire with half of what men do.
This gap in retirement savings doesn’t start out huge – it’s at around 13 per cent for under 30s – but becomes significant by the time we get closer to retirement, widening to 46 per cent for people over 50. It takes many years to build up a pension, so the gap tends to widen as women get older.
One of the reasons for this is the fact that women are paid less than men overall. Women are also more likely to work part-time compared to men. They are more likely to be the main carer for ill and elderly relatives and are more likely to take time out of work to look after young children.
On top of it all, women also tend to live longer than men, which means we need to pay for the associated costs. A woman of 65 is likely to have to fund 21 years of retirement compared to a man’s 19. The Pensions Policy Institute estimated that women need to save 5-7 per cent more than men by retirement to ensure the same level of income. So, what are some practical steps that women can take?
- If you are between 22 and the State Pension age, earn at least £10,000 and are working for an employer in the UK, you will be enrolled in your workplace pension without having to do anything, though you have the right to opt out if you choose to. This is called auto-enrolment. Check if your employer is offering some form of financial wellbeing or financial education training, you can learn a lot from these – and also read any documentation from your pension provider.
- Try to increase your pension contributions. Try to add more to your pot beyond the workplace pension minimum limits, based on your affordable budget. Many employers offer “matching”, which means they’ll contribute extra money if you do – and some even double whatever you pay in.
- Don’t forget your national insurance credits. A lot of benefits, including child benefits, automatically give you NI credits. Sometimes, women don’t sign up for child benefit because when their partner earns over the £50,000 limit, they would need to start paying it back. However, you don’t need to receive the cash per se – you can simply sign up to ensure that your NI record and State Pension are protected.
- Tax relief is key. Earning tax relief on your pension is great – it means a portion of the money you would have paid in tax on your earnings will go directly into your pension pot. If you’re self-employed, you can claim the relief through self-assessment.
- It can be a minefield, but don’t forget to check that you’ve kept track of all your private and company pension schemes. If you’ve had a number of jobs, it can be easy to forget about your previous pensions schemes. The Government’s pension tracing service helps anyone who thinks they may have an entitlement from a former employer, and there are apps and online platforms that can help you consolidate all your pensions. Consolidation might not make sense to everyone in equal measure so always consult a professional financial advisor.
- Your partner can pay into your pension even if you don’t work. You can usually pay up to £3,600 per annum into a partner’s pension if they are not working, which represents a £2,880 pre-tax as a cost for you.
Managing your pension is a huge responsibility, but if you tackle it bit by bit, it won’t feel so overwhelming. The most important thing is not to dig your head in the sand and ignore it entirely
My name is Debbie Edis and I am one of the advisers at Brooks Wealth
If you would like to have a straight forward conversation about your situation of your options then please contact me, I will be delighted to help.
Tel 01733 314553 Email deborah@brookswealth.co.uk Web www.brookswealth.co.uk
This article by Emilie Bellet first appeared on inews.co.uk