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Women save less for their retirement than men and retire on less, with many missing out on the valuable tax benefits that pensions offer.
Official government data shows that women are still being paid just 91p for every £1 their male counterparts earn, so are already at a disadvantage when it comes to the amount they can afford to save for the future.
But many are also missing out on the boost that pension tax relief can provide, with Scottish Friendly’s Family Finance Tracker revealing that nearly half (46%) of women are opting to hold their long-term savings in a savings account, instead of more tax-friendly options such as a pension or ISA wrappers. This compares to 39% of men.
Whereas 33% of men are opting to save into pensions, only 24% of women do. The Family Finance Tracker, commissioned by Scottish Friendly and the Centre for Economics and Business Research (Cebr) tracks how UK consumers are managing their short, medium and long-term financial goals and priorities.
Scottish Friendly’s savings specialist Kevin Brown said: “Women are already having to work harder for their money so it would be a travesty that they then lose out on further building up their hard- earned savings through tax-efficient wrappers and jeopardising future plans as rate cuts start biting.”
You can find out more about the gender pension gap in our article Women and the gender pension gap. Here, we look at why pensions are so important, and some of the steps you can take if you’re just getting started.
If you’re thinking about getting professional financial advice, you can find a local financial adviser on VouchedFor or Unbiased.
Alternatively, if you’re looking for somewhere to start, we’ve partnered with independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,250 reviews on VouchedFor, the review site for financial advisors.
Plan ahead
Many women only begin thinking seriously about what they’re going to live on in retirement when they reach their early 50s, even though that’s probably far too late. A good starting point is to look at a retirement calculator to work out how much you might retire on. If the result is scary (or depressing) don’t let that put you off.
Our article Five of the best pension calculators to help you plan for retirement lists a range of calculators to help you decide what sort of income you’ll need when you stop working.
As a rough guide, experts recommend that you take the year you start saving for retirement, halve it and pay that percentage of your salary into your pension. However, that may be completely unrealistic (if you start saving at 50 you would have to set aside 25% of your salary). Even if you can save a small amount, it will make a difference when you retire, especially as you’ll benefit from tax relief on your contributions.
This means if you pay in £100 it only costs you £80 if you’re a basic rate taxpayer or £60 if you pay tax at the higher rate, and £55 if you’re an additional rate taxpayer. The trade-off is that you can’t get at your pension money until you’re 55 (rising to 57 in 2028).
Can I join my employer’s pension scheme?
If you’re working, usually you will have been automatically enrolled in your employer’s pension scheme under pension auto-enrolment rules. Both you and your employer must contribute to the scheme, and their payments can massively boost the amount you end up with at retirement.
If, for example, you work part-time and earn less than £10,000 a year, you won’t be automatically enrolled into your workplace pension by your employer, but even if you don’t earn more than the £10,000 threshold, you can still ask to join your company pension scheme and your employer can’t refuse. Learn more in our article Can I join my workplace pension scheme if I’m on a low salary?
Auto-enrolment pensions are usually defined contribution pensions.,where the amount you receive when you retire depends on how much you have paid into it, how much your employer has paid in and how the investments made on your behalf have fared. Learn more about defined contribution pensions in our guide What is a defined contribution pension?
If your employer still offers a final salary pension, grab it with both hands. The reason they’re a much better deal than other types of work-based pension is that the amount you get at retirement doesn’t depend on how well (or badly) the stock market performs, but how long you’ve worked for your employer and how much you earn at retirement.
If you’re working for yourself or you’re not working at all, you can still save towards your retirement. Under current pension rules, you or a partner or anyone else for that matter, can pay up to £2,880 a year into a pension on your behalf and still get tax relief at the basic rate. Find out more in our article Can my husband or wife pay into my pension?
Get your free no-obligation pension consultation
If you’re considering getting professional financial advice, Fidelius is offering Rest Less members a free pension consultation. It’s a chance to have an independent financial advisor give an unbiased assessment of your retirement savings. Fidelius is rated 4.7/5 from over 1,000 reviews on VouchedFor. Capital at risk.
Save in a way that suits you
Although pensions are undeniably a great way to save for your retirement due to tax relief and employer contributions (if you’re in a workplace scheme), it’s definitely worth considering other options too.
For example, tax-efficient individual savings accounts (ISAs) are far more flexible than pensions, in so far as you can get at your money whenever you want to and you don’t have to pay tax when you cash them in.
You can pay a maximum of £20,000 into ISAs in the current tax year (2024/25) You get a new ISA allowance at the beginning of each new tax year starting on April 6, so if you can afford to put money away every year, you can potentially build up a substantial tax-free savings pot over time. Find out more in our guide Is it better to save into an ISA or a pension?
Check your State Pension entitlement
To get the full new State Pension, people reaching State Pension age from 6 April 2016, need to have paid, or been credited with, 35 years of full National Insurance contributions (NICs). Those with fewer than 35 so called ‘qualifying’ years get a proportionately smaller State Pension. Learn more about the State Pension in our guide The State Pension explained.
If you aren’t on track to receive the full State Pension, and you can afford to do so, you may be able to make additional National Insurance contributions to make up for missing years. Usually, an individual can only fill in gaps from the previous six tax years, but, until April 2025, those who are entitled to the new State Pension may be able to fill in gaps going all the way back to April 2006. This is the equivalent of 18 years of voluntary NICs in total, between the period April 2006 to 5 April 2024.
It costs around £907.40 to fill in a missing year for 2024-25 but could be less for earlier years. Paying an extra year in the current tax year’s rates could boost your state pension by almost £329 a year at today’s rates. That would mean an additional £6,573 over a 20-year retirement.
Sarah Pennells, consumer finance specialist at Royal London, said: “You may be entitled to free National Insurance credits if you’re caring for a child under the age of 12 by registering for Child Benefit, or if you’re caring for someone else who’s getting certain benefits. In that case, you may be able to top up your National Insurance record for free. But for those who can’t, it’s important not to miss this deadline of 5 April 2025. That’s the date by which you must have paid voluntary National Insurance contributions to make up for gaps between tax years April 2006 and April 2018. After that, you’ll only be able to go back six years and fill in any gaps.”
Learn more in our article Is it worth paying to top up your State Pension?
Be aware of benefits at retirement
If you’re worried that you haven’t saved enough for retirement, make sure you look into government support which may be available to help you make ends meet.
For example, you may be able to claim Pension Credit if you’re on a low income. This tops up your weekly income to £218.15 if you are single or £332.95 if you have a partner. It also opens you up to a variety of other benefits which can help you manage costs such as housing, council tax and heating bills.
Jon Greer, head of retirement policy at Quilter said: “The latest benefits statistics from the Department for Work and Pensions reveals the number of pension credit recipients has fallen by 11,000 over the last year despite the substantial support it can offer to pensioners on low incomes. In February 2024, 1.4 million people were in receipt of pension credit, representing a total of 1.5 million beneficiaries including partners. Of these recipients, two thirds were women.
“Pension credit has become all the more important following the Labour government’s changes to the winter fuel payment which mean it will only be paid to those claiming pension credit or other means tested benefits, so it is vital that pensioners on low incomes check their eligibility.”
The government’s online Pension Credit calculator can provide an estimate of the potential benefits you may be eligible for, and the application process is simple and can be done online, by post or by calling 0800 99 1234. Learn more about Pension Credit in our guide Pension Credit explained.
If you’re thinking about getting professional financial advice, you can find a local financial adviser on VouchedFor or Unbiased.
Alternatively, if you’re looking for somewhere to start, we’ve partnered with independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,250 reviews on VouchedFor, the review site for financial advisors.
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Melanie Wright is money editor at Rest Less. An award-winning financial journalist, she has written about personal finance for the past 25 years, and specialises in mortgages, savings and pensions. She is a former Deputy Editor of The Daily Telegraph's Your Money section, wrote the Sunday Mirror’s Money section for over a decade, and has been interviewed on BBC Breakfast, Good Morning Britain, ITN News, and Channel Five News. Melanie lives in Kent with her husband, two sons and their dog. She spends most of her spare time driving her children to social engagements or watching them play sport in the rain.
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Get your free no-obligation pension consultation
If you’re considering getting professional financial advice, Fidelius is offering Rest Less members a free pension consultation. It’s a chance to have an independent financial advisor give an unbiased assessment of your retirement savings. Fidelius is rated 4.7/5 from over 1,000 reviews on VouchedFor. Capital at risk.