Research from NEST Pensions and Vanguard shows women are better at saving for retirement, and many put a larger portion of their income away than the average man.

However, due to a difference in income throughout life, female retirees can still expect to have an average of £4,999 less per year in retirement income than males who retire at the same time (Source: Aegon).

Why do women have less income?

It won’t apply to every woman, but, overall, it is likely that females will earn less over the course of their working life, than a male counterpart of the same age. There are three key reasons behind this:

  • Unequal pay: Though steps are being taken to rectify this, women’s salaries have typically been lower than men’s. Though it might not be as much of a problem in modern careers, for those who are nearing retirement, it may have been a contributing factor in the early stages of working life.
  • Time out of work: Women aged 16 – 49 with dependent children are more likely to be stay-at-home parents than fathers of the same age, according to data from the Office for National Statistics. Of course, taking time out of work will mean a lack of income, and state benefits are unlikely to offer the equivalent to a full-time job. However, they will help with claiming the State Pension, as explained below. Career breaks will have affected those women who took them in the past, as well as modern mums and carers, for whom taking a break from employment will also mean that their Workplace Pension is not receiving contributions.
  • Part-time hours: Those women who don’t take a complete break from working to care for children or relatives may choose to change to a part-time working pattern. Once again, this may affect their Workplace Pension contributions as they may no longer meet the eligibility criteria.

Maintaining or rebuilding a pension

Working fewer hours or earning a lower income than men doesn’t necessarily mean that you shouldn’t get an adequate pension to support the lifestyle you aspire to, when you reach retirement.

The amount of State Pension you will be able to claim will depend on the number of qualifying years on your record. Therefore, it is vital that you increase that number as much as possible before reaching State Pension Age.

Let’s look at those separately:

Boosting the State Pension

To claim the Full State Pension, you need to have a required number of qualifying years on NI record, those are years in which you have made the full National Insurance contributions. There are three ways these contributions can be made:

  1. Through your employer: For many people, National Insurance contributions are taken from their salary or wages before they are paid.
  2. Voluntary contributions: If you are self-employed or simply have gaps in your National Insurance record, you can make sure it is up to date by making voluntary contributions to increase the number of qualifying years you have on your record.
  3. National Insurance Credits: These are available with some State Benefits, including Employment and Support Allowance, Income Support, Maternity Allowance, Child Benefits and Carer’s Allowance.

The amount of State Pension you will be able to claim will depend on the number of qualifying years on your record. Therefore, it is vital that you increase that number as much as possible before reaching State Pension Age.

First, look at your National Insurance record to see what is needed to maximise your eligibility, you can check your record here.

Find out how much you might be entitled to, by checking your State Pension here.

Once you know what you are working with, you can determine how you will boost your record if you need to.

Your second port of call is to look into any National Insurance Credits you may be entitled to. There are many reasons you may be able to claim National Insurance credits, including the State Benefits listed here. However, we recognise that it may be difficult to know what you are entitled to and it is all too easy to overlook something which could help you in the long run, so we encourage you to contact us for help with this.

Finally, you can make up any remaining gaps in your National Insurance record through voluntary contributions. It might seem counter-intuitive to spend money that you could be saving into a pension, but as it will boost the amount you receive on an annual basis for the rest of your life, it could work out to be more beneficial.

Personal and Workplace Pensions

The State Pension could provide a steady income, but it is unlikely to be enough to support your desired lifestyle when you finish working altogether.

That’s where your other pensions will come into play.

Since the introduction of Automatic Enrolment into Workplace Pensions, more than nine million people have been able to start saving for their future.

Automatic Enrolment means that employees who are eligible benefit from a combination of employer contributions and tax relief which means that their pension funds have the potential to grow quite fast.

These pensions are subject to minimum contributions of 3% employee and 2% employer in 2018/19, however, from April 2019, these will rise to 5% and 3% respectively. Furthermore, the employee contribution benefits from tax relief of 20%, which means every 80p contributed by the employee is made up to £1 when tax relief is added.

Automatic Enrolment applies to employees who earn more than £10,000 per year, or the weekly/monthly equivalent. Anyone earning less than that will need to ask their employer to enrol them into the Workplace Pension and may not be eligible for employer contributions.

Next steps

  • If you are working and able to make contributions into a Workplace Pension, doing so should be a no-brainer, especially if you are eligible for employer contributions.
  • If you are self-employed, consider making contributions into a private pension.
  • Whether workplace or personal, consider making lump sum contributions to your pension when possible. That might be when receiving financial gifts, employment bonuses or, if you are self-employed, when you have a really good month.
  • If you are the working partner in your marriage, consider finding ways to boost your own pension to allow for your retirement income to support both of you in later life. It might sound unfair, but is it worth retiring comfortably, if you then have to watch your partner struggle to enjoy life, or even continue working into old age?

To find financial solutions which will help you to succeed in both working life and beyond, why not talk to us? We can see you individually, or as a couple, and our years of expertise, qualifications and experience mean that we can offer the right solution for you.

To get started, call us on 01664 77 88 99.