Many women face an uncertain retirement

A combination of poor pension planning, increased life expectancy and extended career breaks means that many women face an uncertain retirement warns rural insurer NFU Mutual.

Shelagh Hamer, pensions specialist at NFU Mutual comments, “The impacts of increased life expectancy and the raising of the State Pension Age are likely to be particularly felt by women. This is because women on average not only have smaller pensions savings than men, an issue often compounded by career breaks, but their higher life expectancy means that their smaller funds have to last longer.

“Really the solution is simple: women should take full advantage of the tax relief on offer to build up a decent pension to provide through what will hopefully be a long retirement.

“Don’t put off pension planning. By starting to fund a pension early, you have a much better chance of building up a sizeable fund for your retirement. Also, regularly review your arrangements to make sure they are in tune with any changes in your career and lifestyle.”

Shelagh Hamer explains the potential hazards for women to avoid:

The career break
A woman who works from 18 to age 30 in a final salary pension scheme could accrue a pension benefit of £5,000 per year based on a salary of £25,000 a year. By 40, without a career break, she will have earned at least £9,166 a year, but taking a five-year break, possible to raise children, would reduce her benefit to £7,083 a year, unless she makes up the break later.

If you are thinking of taking a career break try and continue contributing to a pension scheme. You can save the equivalent of your salary each year in a pension for five years, subject to a current maximum of £235,000.

Lower pension provision
The latest ONS figures show that for 50 to 54 year olds in 2002, the median value of men’s pension wealth was estimated at £116,000. By contrast the median for women was only about £60,000. This reflects the fact that many women do not have private pension provision in their own right. Anybody can contribute up to £3,600 into a pension regardless of their earnings, and this can be contributed by a husband or partner on their behalf, to ease the disparity, or make up for the career break.

Pensions provision is not just about pension
The provision of income later in life could come from a variety of sources, including equity release, or savings plans, but you may want to consider specific plans to fund long term care in later life, as dependency can increase with age, as income is eroded by inflation.
Consider saving into a tax-efficient ISA – from 6th April you can put up to £7,200 into an ISA. It can comprise up to £3,600 in ‘cash’ and the remainder in a stocks and shares ISA. Alternatively the full £7,200 can be invested in a stocks and shares ISA.

If you have a partner, consider they take out a joint life annuity when they retire. This means that the income from their pension will continue if your partner dies before you. Also make sure you have enough life cover should your husband or partner die before you.

Divorce
Unfortunately divorce is common in today’s world so make sure that if a split up is on the cards you include pension assets in any financial settlement. After the house, they are often the biggest asset that a couple have.