It pays for women to get smart about their pension

pays for women to get smart about their pensions

Pensions

Julie Hutchison

5th June 2015 at 10:13am

What is it that makes women and pensions such a hot topic?

Is it because they have lower pension savings than men? Or that they live longer so need to save more to comfortably see them through their retirement?

The answer is yes to both of these points. Then there’s the fact that many women – and it’s mostly women – take time out of their careers, or work part-time, to raise children or care for relatives and end up with a smaller State Pension because of lower National Insurance contributions. Rises in the age when women can claim the State pension makes the picture even more complex.

It’s a situation which led Ros Altmann, the recently-appointed Pensions Minister, to say that when it comes to pensions, women are “second class citizens”.

The good news: women are saving more

At least things are changing for the better with half of British women now saving enough for retirement, according to Scottish Widows’ The Women and Retirement Report.* However they typically save £206 a month, which compares to an average of £298 saved by men, revealing a pensions gender gap.

New pension rules make it easier for women to get the full State Pension, even if they’ve taken time out of their careers as carers.

… but 50% still don’t save enough

The bigger picture is patchier. With half still not saving enough – managing just an average of £100 a month – there’s still some way to go to try to ensure women plan for a comfortable retirement which allows them to retire when they want to, at age 62. That’s three years earlier than when they believe they can afford to.

With all this in mind, what steps you can take to make the most of your retirement savings?

  • Start saving early: The longer you save, the longer your savings will have the potential to grow
  • Join your employer’s workplace pension scheme if it has one: Your employer adds money in to your pension, boosting your savings; and for every £80 you save, the tax man tops it up with £20 in tax relief
  • Be informed: Knowing when you’ll be entitled to the State Pension will help you plan. It’s now age 65 and on the way up to 68
  • Check your State Pension entitlement if you’re a carer: Under recent pension reforms, those who take career breaks to look after children or elderly relatives will at least now get the full State Pension even if they haven’t paid enough National Insurance contributions – but only if they’re claiming child benefit or carer’s allowance
  • Keep saving: Pensions are the most tax-efficient savings around. And, under new tax rules from this April, you can pass on more of your pension on to your loved ones – sometimes free of tax.

*The Women and Retirement Report 2014, Scottish Widows

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The information in this blog or any response to comments should not be regarded as financial advice. A personal pension is an investment. Its value can go up or down and may be worth less than you paid in. Tax and legislation can change in the future and this represents our understanding of the rules in June 2015