Women and Pensions
Women are by far the greatest victims of poverty in retirement, with many failing to plan for, or understand, pensions.
Many think the state pension will cover them, but women in fact are the ones that often do not accumulate a full state pension because they do not have enough national insurance contributions of 30 years.
Career breaks, maternity leave, and lower pay are some reasons why women may be subject to smaller pensions.
If you are still working, there are things you can do now, to ensure you give yourself the best income opportunity for when you retire.
Making up for missed pensions contributions
You can increase your personal pension or workplace pension pot by paying additional voluntary contributions (AVCs).
AVCs are extra contributions that you make on top of your normal pension payments.
This could be worth considering if you are heading back to work after a career break and particularly if you have landed a well paid job.
If you are interested in paying AVCs, then speak to your employer or fill out the appropriate forms and arrange for the additional contributions to be made.
It is also possible to increase your state pension if you think you are going to fall considerably short of national insurance contributions that count towards your basic state pension.
It may be possible to buy additional voluntary national insurance contributions to make up for the shortfall.
You can apply to pay for voluntary national insurance contributions here.
If you want to know what your state pension benefit might be, you can apply online for a state pension forecast here.
Divorce and pensions
Unfortunately, if you are heading for a divorce, your pension savings are up for discussion and may need to be split between you and your ex.
The courts decide how the pensions will be split, but typically, it is done in one of three ways.
1) Pensions off-setting – you both keep your pension, but other things may be altered, so for example, the person with a smaller pension may get a larger share of some other valuable.
2) Pension-sharing – you get part of your ex-partners pension as a new pension for yourself.
3) Pensions attachment/pensions lump sum order – you get some of your ex-partner’s pensions or lump sum when they reach retirement age and start withdrawing their income
National Insurance Credit
If you have been in situation where you have been unable to pay national insurance – for example unemployed, ill, or having to care for someone – then you may be able to get national insurance credits, which can go towards your basic state pension.
You may be eligible if: you are unable to work because of a disability or illness; you get carer’s allowance; you are getting working tax credits; you are getting statutory maternity pay; you are getting statutory adoption pay; you are unemployed but actively seeking work; on jury service; or you have served a prison sentence for a conviction which was then quashed.
Normally, you get credits automatically, but it is worth knowing about them, as sometimes you may have to claim for them.
If you think you should be entitled to credits but are unsure if you are getting them, click here for more information.
More people are beginning to realise that they need to start saving for a pension and that the younger the better. But how much you should stash away for old age can be difficult to work out and very much depends on your age, your employment situation and affordability.
This calculator will help you work out how much you should put away and how you can help yourself towards a comfortable retirement.