Ladies listen up, here are some frightening female finance facts –
• A woman’s income in retirement is generally 40% that of a man’s!
• Women have never truly been able to rely on the Government’s help in retirement!
• Women need 39 (yes 39!) years of full NI contributions to get the full basic state pension!
• One in four single retired women already live below the breadline!
• AND it’s going to get worse as post-war women are facing an even bigger pension’s crisis.
I know I know, talking about pensions is the fastest way to send anyone into a coma but seriously, it’s time for women to take charge of their retirement planning and get the deal they deserve.
So why do women still get such a raw deal, surely the days of sexual inequality are long gone?
• It’s a fact that women still take on the majority of child care which can lead to career breaks and higher financial commitments.
• It’s a fact that there is still a pay discrepancy between the sexes.
• It’s a fact that more women than men work part-time.
• It’s a fact that women receive inferior annuity rates to men.
• It’s a shameful fact that 20% of honest independent minded women between the ages of 18 and 34 prefer not to worry their pretty heads about such things and let their male partner do all the planning – oh blimey.
So what can be done?
1) Understand the options that are open to you…see the Tax Consultants Guide’s Jargon Buster below
2) Take advice to find the best option for you…see What Next below
3) Don’t be lazy or indifferent, act!
Jargon Buster: –
Basic State Pension – the amount you are entitled to is based on the NI (National Insurance) contributions an individual makes during their working life. Women who take time out of the employment arena or who earn under the NI threshold lose out and do not qualify for the full Basic State Pension…which let’s face it isn’t much anyway! At the moment it’s just over £65 a week.
SERPS – or State Earnings Related Pension Scheme. The amount you get out depends on the amount you pay in and the amount you pay in depends on the amount you earn in the first place! If you don’t opt out, if you do earn enough and if you do pay employee’s NI then you are automatically part of SERPS.
Occupational Pension Scheme – these are schemes provided by an employer into which both you and your employer can pay – 60% of women don’t have one!
Personal Pension Scheme – these are arranged by YOU with a bank, building society or other financial institution…oh and 60% of women don’t have one of these either!
Income Support and the Minimum Income Guarantee – in 1999 the Government introduced the Minimum Income Guarantee which is, simply put, a threshold below which no retired person’s income should be allowed to fall. Theoretically the Basic State Pension would be boosted by Income Support should an individual’s income fall below this minimum income threshold…Income Support is means tested.
State Second Pension – Introduced in 2002 by Labour and already being considered for the scrap heap by the Conservatives this is for people paying NI and earning under £9500 AND for those who are full time care givers (including someone looking after an under five year old child)…these people will be counted into the scheme as if they were earning £9500.
Stakeholder Pension – Launched in 2001 this scheme encourages people on ‘modest’ incomes of between £9500 and £18000 to save for their retirement. Government research out today shows that three-quarters of companies offering stakeholder pensions to workers actually have no members in their schemes!
What Next: –
The Tax Consultants Guide recommends that you get independent financial advice from a professional who will best assess your individual situation.
Consider the following points as well: –
Join your employer’s occupational pension scheme (if one exists!) or get yourself a personal pension.
The sooner the better – don’t put off until tomorrow what you can do today!
Increase your contributions as your income increases and pay in as much as you can afford while you’re earning.
If you’re on a lower income you may wish to consider alternative savings vehicles – ISAs, National Savings or mutual funds for example, which can all be accessed if needs be prior to retirement. Consider the tax effectiveness of any savings vehicle and remember that pension contributions generally have a higher rate of tax relief.
If you face a divorce make sure you know the value of your husband’s investments including his pension before a settlement is agreed upon.
If you’re taking a career break to care for your children you can still continue to pay into a personal pension.
Never forget that the value of an investment can go down as well as up!