Yesterday’s official employment figures report more than 10 million workers in the 50-plus age bracket. While previous generations kept their heads down and ditched the nine to five as soon as they got to 60 for women and 65 for men, it’s a very different picture today. Not only is the state pension age on the rise, but more and more women in particular are carrying on working.
The number of women aged 16-64 who describe themselves as retired has hit a record low of 679,000 - down from a high of 1.11 million in 2008. The number of men who define themselves as retired in this age group remains flat at approximately 4.5 million throughout the same period.
There’s something of a shift going on and while they say necessity is the mother of invention, these mothers and other similarly pension-poor women, are most probably having to adjust to stay financially afloat. If that carries on, the number of women working later in life is only going to increase, out of necessity if nothing else.
It’s a marathon not a sprint
There are two main reasons why women might need to work longer. Firstly, they can expect to live longer, on average, than their male counterparts and secondly, they tend, on average, to put less aside for their future than men.
Taking time out to have a family and/or care for elderly relatives means many women are not contributing enough on a regular basis to their pension pot.
Figures from Aegon show that by the time they’re 50, women have, on average, pension savings of just £56,000. That’s half a man’s average pension pot at the same age.
A fifth of women at any one time are providing care to a sick, disabled or elderly person. By the time they’re in their early 40s, one in seven women will be looking after both their own children and their elderly parents.
But while the lucrative career may have to go on the back-burner, at least for a while, it’s important that you don’t abandon your longer-term financial plans. You can still save into a self-invested personal pension (SIPP) even if you’re not working. If you pay into a pension scheme you benefit from basic rate tax relief (20%) on the first £2,880 a year that you put in. Under current tax relief rules, the government will top-up your contribution to £3,600.
Don’t throw the baby out with the bath water
If you take time out of your career to bring up a family, make sure you register for child benefit, even if you know you won’t qualify for the monthly payment, because you know that you or your spouse/partner earn above the qualifying threshold.
That’s because, by registering you’ll make sure you receive the national insurance (NI) credits that will help you qualify for a state pension. You now need to have the correct number of NI credits per year for 35 years to get the full state pension. If you miss 12 years of NI credits you’ll struggle to get the full state pension.
The first step is to check whether there are any gaps in your National Insurance record. You may then be able to fill in any gaps by making voluntary payments; your NI record will tell you how much this would cost you. You should contact HM Revenue & Customs (HMRC) if you think your record is incorrect.
Tackle some DIY
If you do work, but part-time and so fall short of automatic enrolment into your company’s pension scheme, take matters into your own hands.
Everyone can pay into a pension, so if you have earnings of less than £10,000 with one or indeed each employer (because these schemes only take into account your earnings from that one employer rather than overall) then open up a SIPP account and make your own pension contributions. You get the same tax benefits as with a workplace pension, so for every £80 you pay in, your SIPP will be topped up to £100 once tax relief has been added.
By drip-feeding small sums regularly, into either an ISA or a SIPP, you can save for your future without sacrifice today. For more on the power of small sums and how to save for your future, even if you haven’t got a lot of cash to spare today, take a look at this clip from our latest episode of MoneyTalk.
Watch the latest full episode of MoneyTalk.
The value of investments and the income from them can go down as well as up, so you may not get back what you invest. If you invest in an ISA or pension there is no capital gains tax on growth and no income tax on interest. The value of tax savings and eligibility to invest in an ISA or self-invested personal pension (SIPP) depend on personal circumstances. All tax rules may change in future. Withdrawals from a pension product will not be possible until you reach age 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
Combining your pensions into a Self-Invested Personal Pension (SIPP) can make it easier to manage your savings - and it could be cheaper, with lower fees than you’re currently paying.