Friday, 29 April 2016

Women's pensions: know the facts

The Government’s plans to increase to the State Pension Age for women may affect you. Make sure you know all of the facts

On average, we women have poorer pension provision than our male counterparts, largely because, typically, we earn less money for the same job and because we take time out to have a family. Equalisation of the male and female state retirement ages is a political hot potato. This is because, in some situations, women will lose out on their pension entitlement simply because they were born at the wrong time.

Women Against State Pension Inequality (WASPI) campaigns for fairer transitional arrangements for women born "on or after April 6, 1951 who have unfairly borne the burden of the increase to the State Pension Age".

What is happening and will you be affected?
The state pension age for women will shift from 60 to 66 by 2020. This is a massive change, particularly given that only five years ago, the state pension age was 60 and now, in 2016, it is 63. According to reports, some women could lose out on as much as £20,000 in accumulated pension income in retirement.

Firstly, the Government has tried to soften the blow by postponing the date at which the pension age becomes 66 to October 2020 from April 2020. Sadly, Six months will make little difference to anyone.

Secondly, from April 6th, to qualify for a full state pension you will need to evidence 35 years' of National Insurance (NI) payments. If you had reached state pension age prior to April 5th, you would only have needed 30 years of NI payments. So, in future, women will need to work five additional years to qualify for the full state pension.

Thirdly, you can no longer claim any state pension based on your husband's NI record although you do now qualify for NI credit if you are a carer for your young children or elderly parents. You should get this automatically if you are claiming child benefit for a child aged 12 or under or in receipt of carer's allowance.

WASPI claims that women were given insufficient notice of the changes being brought about by equalisation of male and female state retirement ages, giving them little time to make alternative pension provision.

If you are affected by these changes, what can you do?
Whether or not you are adversely affected, equalisation is almost upon us and you need to consider how you can improve your financial position at retirement.

Check the date on which you reach your state pension age and the amount of your estimated state pension. You can do this online at

If you do not qualify for the full state pension, there are still a number of things you can do:
1. Consider taking out a personal pension or increasing your contributions to your pension savings. If you put as much as £40,000 a year into a pension, you will receive full tax relief, providing you earn enough to warrant it. The Government will not give you more in tax relief than you pay in taxes, so make sure you can earn at least as much as you pay into your pension.
2. Even if you aren't earning, you can put in up to £3,600 into a pension each year. You would only need to contribute £2,880 and the Government will add tax relief of £720 on your behalf.
3. Make sure you claim all the tax relief you are due. If your earnings put you in the 40% tax bracket, you will receive 40% tax relief on pension contributions. The standard 20% is paid automatically. If you are in an employee pension scheme, the additional 20% may be claimed for you but never assume this. Ask your boss or HR department to make sure you are not missing out. If you are in a personal pension, claim this extra money yourself using your tax return. If you have not done so, do contact HMRC as soon as possible. You can reclaim overpaid tax from up to four years ago.

If you are close to retirement, you may think there is not much to be gained by putting money into a pension now. But, doing something is far better than doing nothing. A good adviser will be able to help you make the most of your money before you retire.

Anna Sofat, Founder, Addidi Wealth

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