How Women Can Get A Better Pension

Investing and pensions

Updated on 16 December 2008 | 0 Comments

More and more women are working past their state retirement age of 60, due to inadequate pension provision. Here are some tips on how women can boost their retirement income.

According to the Office of National Statistics, more and more women are working past their state retirement age of 60, due to inadequate pension provision.

The number of women aged 60 and over and still working has risen by 30% to 650,000 in eight years, and those aged 50-59 and employed has risen by 25% to 2.6m. And the forthcoming rise in State retirement age from 60 to 65, to be implemented between 2010 and 2020, is set to make the situation worse.

What's more, the full, basic State pension currently requires a full 39 years of NI contributions for a woman and payments decrease proportionately.

There is, however, some good news. The Pensions Bill, which is still working its way through Parliament, looks set to improve things. In this bill, if a woman (or a man) reaches retirement age after April 6, 2010, she only need have contributed for 30 years to receive a full state pension, and credits for 'caring' can go towards that contribution history. Caring, according to the bill, includes looking after a child under the age of 12.

These are welcome improvements, but women still may struggle when it comes to private pensions.

After all, women on average:

  • Take career breaks to bring up children/care for elderly relatives
  • Earn around 80% of male colleagues' hourly rates
  • Are more likely to work part-time
  • Live longer
  • Save less.

To help fund a better retirement, it is essential that women start saving and investing as early as possible. Unfortunately, many women (and men!) are failing to do so. So what can women do to improve their retirement prospects?

Here are some of the first things that all women can do, regardless of age:

1. Apply for a State Pension Forecast. This will tell you what your projected basic State Pension will be. Decide whether or not to make up for any missed National Insurance contributions.

2. Consider joining your company's pension scheme, if able to. If your employer also contributes this can be one of the most lucrative ways to save for retirement. Alternatively, you could open a personal, low cost stakeholder pension.

3. Consider contributing as much as possible to your pension; remember that any employer contributions count too.

4. If you have a personal pension, try using this calculator to predict the size of your fund upon retirement.

5. Should you be unfortunate enough to go through a divorce; rulings in 2000 mean that you may be entitled to share your husband's pension and deposit a chunk of it into your own.

All women have different individual circumstances; however, to give you an idea of what you could put in place for your retirement, here is a rough example of what a woman between the ages of 20 and 70 could do:

Read through the suggestions for what you should do at your age, and the ones preceding it, and you can hopefully start to get your retirement plan in order and claim all of the benefits available to you.

Assumptions made: Example is based on a woman who: starts work in her twenties, becomes a higher rate taxpayer and has children in her thirties, returns to work and then cares for an elderly relative in her forties and retires in her sixties.

If you are in your Twenties...

  • Try and make a minimum monthly contribution of at least 10% of your salary into your pension each month (which can include any employer contributions). Remember, the earlier that you contribute, the better.
  • Alternatively, (or additionally) consider investing monthly for retirement. A low-cost index tracker ISA can be a simple way to do this.
  • Consider whether or not to top up any missing year's National Insurance (NICS) payments. If you think your male colleagues are earning more than you for doing the same job -- ask for a pay rise and you'll increase your pension contribution too.

If you are in your Thirties...

  • Try and make a minimum monthly contribution of at least 15% of your salary into your pension each month (which can include any employer contributions).
  • If you are a higher rate taxpayer, you will only gain basic rate tax relief automatically on your pension contributions. Don't forget to claim back the other 18% when you fill in your annual tax return or by completing a form PP120 (available from tax offices/pension scheme administrators).
  • All women (whether full or part time employees) on paid maternity leave are entitled to have their company pension rights maintained as if they were working normally. So your employer must maintain its normal contribution. You, on the other hand, need only contribute the percentage of actual maternity pay received.
  • If you intend to take any unpaid maternity leave, find out what the conditions are should you wish to maintain pension contributions; some companies may make up these contributions for you.
  • If you're not working and can still afford it, consider continuing payments into your pension. Alternatively, we are all allowed to pay into someone else's pension without affecting the amount of tax we pay. If you are not working, your partner could continue making contributions to your pension on your behalf. Or vice versa.
  • Consider whether or not to top up any missing year's National Insurance (NICS) payments.
  • Make sure you and your partner have enough protection should anything happen, could the other one cope financially (especially if children are involved)?

If you are in your Forties...

  • Try and pay in at least 20% of your salary into your pension each month (which can include any employer contributions).
  • If you are currently spending at least 35 hours each week caring for a disabled person who receives middle or highest rate of Disability Living allowance, you may be entitled to claim Carer's Allowance (currently paid at £48.65 per week).
  • If you're not working and can still afford it, consider continuing payments into your pension. Alternatively, we are all allowed to pay into someone else's pension without affecting the amount of tax we pay. If you are not working, your partner could continue making contributions to your pension on your behalf.
  • If you have little or no pension, consider topping up any missing year's National Insurance (NICS) payments.

If you are in your Fifties...

This article has given some brief ideas of what women can do to start getting their retirement plans into shape, but it certainly doesn't claim to have covered everything. The following organisations can provide a wealth of further information and help:

An earlier version of this article was published in June 2005.

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