Simon Read: Why pensions are a girl's best friend
Saturday 11 April 2009
Shocking figures from the Prudential published this week reveal that women retiring this year will end up with annual pensions worth around one-third less than men. Women will get an average pension of just £13,671 – while the average man's annual pension will be £20,313. The £6,642 pension gender gap is because women are more likely to give up work to care for children or relatives, the Pru said.
Of course, the fact that women's wages are still considerably lower than men's is a big factor. The Office of National Statistics reports that the gap is as high as 17 per cent – a scandal in itself. On top of that, only around one-third of women currently retiring have built up an entitlement to a full state pension in their own right. For men, the figure is 85 per cent.
About 2.8 million women in the UK are due to retire this year. I suspect many will look at their meagre pension expectations and decide to work on for a few extra years to boost their retirement income. Few will choose – like the actress Helen Mirren (below), now three years past the current woman's retirement age of 60 – to carry on working because they're still much in demand. For most, it will be a financial necessity.
In terms of qualifying for a state pension, it may actually pay some women to delay their retirement until April 2010 if they can. The Government is changing the rules then, so that from 6 April next year women retiring will need only 30 qualifying years of National Insurance contributions to be entitled to a full state pension in their own right. Until then, women need 39 qualifying years.
Being aware of the changes is important in deciding about retirement timing but, frankly, waiting until you reach or near retirement to start worrying is too late. In an ideal world, we should all be packing away cash for our later years as soon as we start earning.
Experts suggest that, to get a decent retirement income, people should try to save half of their age as a percentage of their salary into a pension scheme. So if you're 25, you should pack 12.5 per cent of your salary in a pension. At 30, it should be 15 per cent. By the time you reach 40, it should have hit 20 per cent.
In the real world, we all have more important things to spend our cash on than the future. But right now there are thousands of people who are a little more cash-rich because their mortgage commitments have shrunk. Using that cash to boost their pension pot is probably a better option than sticking it into a savings account.
It's not just that most savings rates are so paltry at the moment, but that you also get tax relief on pension contributions. Non-taxpayers or basic-rate taxpayers get relief of 20 per cent, higher-rate taxpayers get 40 per cent. That means that higher-rate payers need to put just £60 into their pension to see their fund boosted by £100. Basic-rate taxpayers need only put in £80 to get a £100 injection.
Need another powerful incentive? Just ask anyone approaching retirement whether they wish they had put more into their pension. Anyone who says otherwise is either a happy fool or an Oscar contender.
- 1 Malaysia Airlines MH17 crash: Pro-Russian rebel 'admits to shooting down plane'
- 3 Israel-Gaza conflict: The myth of Hamas’s human shields
- 5 Dutch paedophile club to fight their ban at the European Court of Human Rights
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
iJobs Money & Business
£350 - £400 per day: Orgtel: PMO Analyst - Banking - London - £350 -£400 per d...
£300 - £350 per day + competitive: Orgtel: Cost Reporting Manager - MI Packs -...
£35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...
£475 - £525 per day: Orgtel: Test Lead, London, Investment Banking, Technical ...
Day In a Page
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar