Are you counting on getting the same State Pension as everyone else? That might depend on your gender.
According to calculations from Which?, many women receive an average of £29,000 less than men from the State Pension, over the average 20-year retirement.
The reason behind this is quite simple, but that doesn’t necessarily mean that it’s fair; nor should it be the norm for all women. So, what could affect the amount of pension you receive in later life, and how can you avoid it?
How the State Pension is calculated
To be eligible to receive any State Pension, you must have at least 10 years of National Insurance contributions on your record. How much you receive each week will depend on how many qualifying years you have in total, and to receive the Full State Pension, you will need a minimum of 35.
Qualifying years can be accrued in three ways:
- By paying National insurance through an employer or self-assessment
- By receiving National Insurance Credits, which are awarded by claiming some State Benefits
- By making voluntary payments
What causes women to miss out on State Pension eligibility?
Put simply, women are more likely to work less hours, take time off work or leave employment altogether for periods of time during their lives.
Having children and taking care of elderly and infirm relatives are the main reason given by women who take career breaks or reduce their working hours for family-related matters.
Taking years out of work and reducing the hours spent working will result in a lower number of qualifying years when reaching State Pension Age, and thus, receiving a lower weekly amount.
Making sure you get more
It is possible to build your National Insurance record to make sure that you are entitled to enough State Pension income to help to support the lifestyle you want to live when you stop working.
However, understanding your State Pension should be seen as a part of the wider retirement planning process. So, to make sure that you have enough retirement income to achieve your goals, you can:
- Calculate how much you will get:
Using a State Pension forecast calculator, you can see how much you will have when you stop working and need to access your pension.
Knowing how much you will have if you don’t make any changes to your current situation will help you to identify any shortfall.
- Fill in any gaps in your record:
You can view your National Insurance record and make any voluntary contributions by clicking here.
- Evaluate your other pensions:
Knowing what you can expect to get in retirement income from your workplace or personal pensions will give you a better idea of the overall income you can expect to receive when you stop working.
- Seek financial advice:
Research has shown that those who engage with a financial adviser or planner could put an additional £98 toward their pension each month. This equates to an extra £3,654 in annual retirement income for later life.
Talking to a financial planner will also enable you to make better financial decisions and create a plan which will see you meeting your long-term retirement goals by making adjustments and changes in the short-term.
To get started, please feel free to contact us.
