Women face numerous obstacles in building a retirement income, obstacles that are deeply rooted in our psyche – lower pay and societal pressures on women to shoulder the taking care of children and adult care to a greater extent than men, for example. Many in the industry appear happy to accept the status quo as a fait accompli, which isn’t terribly helpful, and is unnecessary as far as LEBC The Retirement Adviser is concerned.
The Pensions Gender Gap has been a key focal point for LEBC for some time and Kay Ingram, Director of Public Policy at LEBC is keen to highlight the firm’s forward-looking approach; it has flagged six practical steps all women are able take to redress the pensions gender gap imbalance and improve their security in old age – right now and ahead of any changes that may ultimately be made to the pension rules.
1. Non-working Women
Earmarking part of the household budget for their retirement savings: long career gaps, with little or no pension savings being made for decades, disadvantage women more than any other factor. However, the current rules allow all under age 75 to save up to £240 per month and to receive a 20% boost from the Government on their savings. Women who contribute to the family by caring for others and running the house should therefore demand that some regular private pensions are made from the family budget.
2. Women at Work
Join your employers’ scheme at every opportunity and remain a member while on maternity leave: all employers are obliged to pay into pensions for workers aged 22 to 65 who earn more than £10,000 a year. The current minimum contribution is 2% from the employer, rising to 3% of eligible earnings from next April. Even if earnings are below this level, the employer may offer membership of the scheme and many employers pay in more than the minimum. This is tax-free money. Employer contributions may also continue during maternity leave, even after Statutory Maternity Pay ends.
3. Women Living with a Partner or Spouse
Don’t make assumptions that your husband or partner’s scheme will automatically provide for you in retirement. While some schemes do, it all depends on the scheme rules and the kind of provision your husband/partner has indicated they want to be made for you. You have no automatic rights to a pension if you survive your partner or spouse unless the scheme rules say you do. Cohabiting women are especially vulnerable and may get nothing; they are excluded from benefitting from the State Bereavement Pension and may only inherit after paying inheritance tax at 40%, if left more than £325,000 including the value of the home.
4. Divorcing Women
Divorce amongst older couples is on the rise: for older couples, pension assets can be of greater value than the family home. Astonishingly, research by Scottish Widows shows that 71% of divorcees do not take pensions into account when splitting assets. Since 2000 the spouse with the lower pension has a right to have some of the other spouse’s pension transferred into their name. Women are the ones who miss out by ignoring their rights to a pension share.
5. Keep Track of Your Pensions
It is a common mistake to dismiss pensions earned in the early part of a career; today there is estimated to be £20 billion of pension assets unclaimed. A new digital Dashboard promoted by the Government will help to keep track of these in the future, but for those nearing retirement, tracking down all your pensions will be worthwhile. Even though you may have earned little 30 or so years ago, all pensions since must be inflation-linked, so the value of your pension could mean the difference between affording luxuries when retired or not.
6. All Women
Women tend to take less investment risk than men when saving and investing. They need to consider that cash-based investments will not keep pace with inflation and when saving long term, this is important if the income the savings produce are to maintain their buying power. Balanced risk investments which provide returns from a variety of investments are more likely over the long term to enable savings to keep pace with inflation.
At retirement women are also less likely to shop around when looking to convert their pension pot into a higher income. Only one in four of those who use LEBC’s lifetime income broking service are women – which means that many are potentially missing out on thousands of pounds of extra income.