By Alison Hunt of Motley Fool

According to the Office of National Statistics, more and more women are working past their state retirement age of 60, due to inadequate pension provision.

The number of women aged 60 and over and still working has risen by 30% to 650,000 in eight years, and those aged 50-59 and employed has risen by 25% to 2.6m. And the forthcoming rise in state retirement age from 60 to 65, to be implemented between 2010 and 2020, is set to make the situation worse.
Many of these women simply have no choice in the matter, due to the fact that without this income they would experience severe financial hardship. Only 16% of newly retired women can claim the full, basic State pension, compared to 78% of men.

Indeed, reports from Age Concern and the Fawcett Society have said that reform is needed or else 20% of single women pensioners will continue to live in poverty.

The full, basic State pension requires a full 39 years of NI contributions for a woman (soon to increase to 44 years) and payments decrease proportionately, providing women who have contributed for 10 years or less (rising to 11 years, as currently for men, in 2020) with absolutely nothing.

For a good retirement income, therefore, you ideally need to have worked full time in a well-paid job for many years, thus providing a good occupational pension in addition to a full state pension.

However, women on average:

• Take career breaks to bring up children/care for elderly relatives
• Earn around 80% of male colleagues’ hourly rates
• Are more likely to work part-time
• Live longer
• Save less.

A possible solution that has been suggested is for the State pension to be replaced by a Citizen’s Pension eligibility for which would be based on residency, rather than contributions.
In addition, Age Concern and the Fawcett Society believe that low-paid workers should also be entitled to the State Second Pension (S2P) without having to make contributions, which would also help to compensate women for time out for the workplace.
And proposed EU plans may outlaw gender discrimination when calculating annuity rates and insurance premiums. You may lose out on ‘lady driver’ motor insurance discounts, but you’ll potentially gain by paying less for your annuity.

To help fund a better retirement, it is essential that we start saving and investing as early as possible. Unfortunately, many of us are failing to do so. This cannot even be attributed to lack of affordability, as a report from Scottish Widows has found that one third of us who aren’t saving enough for retirement earn more than £30,000 p.a.

So what can women do to improve their retirement prospects?
There are a number of ways we can help ourselves – and they all require us to act now. Here are some of the first things that all women can do, regardless of age:

1. Apply for a State Pension Forecast. This will tell you what your projected basic State Pension will be. Decide whether or not to make up for any missed National Insurance contributions.
2. Consider joining your company’s pension scheme, if able to. If your employer also contributes this can be one of the most lucrative ways to save for retirement. Alternatively, you could open a personal, low cost stakeholder pension.
3. Consider contributing as much as possible to your pension remember that any employer contributions count too. Check out the table below for the maximum contributions you can make at your age.
4. Everyone (even those not working) can save up to £2,808 into their pension each year and still gain basic rate tax relief which will increase the total deposited by £792 to £3,600. If you are not working but can still afford it, consider contributing to your pension.
5. If you have a personal pension, try using this calculator to predict the size of your fund upon retirement. An ideal pension pot should contain at least £300,000.
6. Should you be unfortunate enough to go through a divorce; rulings in 2000 mean that you may be entitled to share your husband’s pension and deposit a chunk of it into your own.
All women have different individual circumstances; however, to give you an idea of what you could put in place for your retirement, here is a rough example of what a woman between the ages of 20 and 70 could do:
Read through the suggestions for what you should do at your age, and the ones preceding it, and you can hopefully start to get your retirement plan in order and claim all of the benefits available to you. However, bear in mind that new pension rules come into force in April 2006 so called ‘A’ Day. We will be allowed to gain tax relief on annual contributions of up to £215,000 (rising to £255,000 by 2010), plus there are a host of other changes.
Assumptions made: Example is based on a woman who: starts work in her twenties, becomes a higher rate taxpayer and has children in her thirties, returns to work and then cares for an elderly relative in her forties and retires in her sixties.

If you’re in your 20′s…

• Try and make a minimum monthly contribution of at least 10% of your salary into your pension each month (which can include any employer contributions). Remember, the earlier that you contribute, the better.
• Alternatively, (or additionally) consider investing monthly for retirement. A low-cost index tracker ISA can be a simple way to do this.
• Consider whether or not to top up any missing year’s National Insurance (NICS) payments. If you think your male colleagues are earning more than you for doing the same job – ask for a pay rise you’ll increase your pension contribution, too.
• If you earn more than £10,800 each year, decide whether or not to contract out of S2P.

If you’re in your 30′s…

• Try and make a minimum monthly contribution of at least 15% of your salary into your pension each month (which can include any employer contributions).
• If you are a higher rate taxpayer, you will only gain basic rate tax relief automatically on your pension contributions. Don’t forget to claim back the other 18% when you fill in your annual tax return or by completing a form PP120 (available from tax offices/pension scheme administrators).
• Consider saving any bonuses into your pension you will effectively keep more of your cash.
• All women (whether full or part time employees) on paid maternity leave are entitled to have their company pension rights maintained as if they were working normally. So your employer must maintain its normal contribution. You, on the other hand, need only contribute the percentage of actual maternity pay received.
• If you intend to take any unpaid maternity leave, find out what the conditions are should you wish to maintain pension contributions some companies may make up these contributions for you.
• You can protect your State Pension if you stop working to bring up children- or to care for someone, by claiming Home Responsibilities Protection (HRP). This will provide credits under certain circumstances and so prevent gaps in NI contributions allowing your basic State Pension to build normally. Remember, HRP is only available to those claiming Child Benefit or Income Support – so make sure the right person is receiving the payments.
• If you’re not working and can still afford it, consider continuing payments into your pension. Alternatively, we are all allowed to pay into someone else’s pension without affecting the amount of tax we pay. If you are not working, your partner could continue making contributions to your pension on your behalf. Or vice versa.
  Consider whether or not to top up any missing year’s National Insurance (NICS) payments.
• Make sure you and your partner have enough protection should anything happen, could the other one cope financially (especially if children are involved)?

If you’re in your Forties…

• Try and pay in at least 20% of your salary into your pension each month (which can include any employer contributions).
• Protect your State Pension if you’re currently caring for someone by claiming HRP (see above).
• If you are currently spending at least 35 hours each week caring for a disabled person who receives middle or highest rate of Disability Living allowance, you may be entitled to claim Carer’s Allowance (currently paid at £45.70 per week).
• You can make up for missed year’s contributions to a personal pension by using ‘carry back’ which allows you to make a contribution in the current year but will class it as though it were made the previous year.
• If you’re not working and can still afford it, consider continuing payments into your pension. Alternatively, we are all allowed to pay into someone else’s pension without affecting the amount of tax we pay. If you are not working, your partner could continue making contributions to your pension on your behalf.
• If you have little or no pension, consider topping up any missing year’s National Insurance (NICS) payments.

If you’re in your 50′s…

• Try and pay in at least 25% of your salary into your pension each month (which can include any employer contributions).
• You can make up for missed year’s contributions to a personal pension by using ‘carry back’ which allows you to make a contribution in the current year but will class it as though it were made the previous year.
• Some women may be entitled to start drawing their pension find out your details and decide when you intend to draw your pension.
  If you have little or no pension, consider topping up any missing year’s National Insurance (NICS) payments. You can pay voluntary contributions for the last six tax years, so nine qualifying years could be boosted to ten, which will provide entitlement to a quarter of the basic State pension (around £1,034 each year).

If you’re in your 60′s…

• If you’re still working, try and pay in at least 30% of your salary into your pension each month (which can include any employer contributions).
• Shop, shop, shop around for the best rate for your annuity.
• Depending on your income you may be entitled to Pension Credit, even if you own your own home. Use this calculator and fill out the application form; even if you’re only entitled to a small amount you could get extra help via Council Tax and/or Housing benefits. Plus, you can claim up to twelve month’s back-payments if you were entitled to claim earlier.
• If you have little or no pension, consider topping up any missing year’s National Insurance (NICS) payments.

This article has given some brief ideas of what you can do to start getting your retirement plans into shape, but it certainly doesn’t claim to have covered everything.

Useful links
The following organisations can provide a wealth of further information and help:

• The Department for Work and Pensions (DWP) (www.dwp.gov.uk)
• The Pension Service (Part of the DWP) (http://www.thepensionservice.gov.uk/)
• The Pensions Advisory Service (TPAS) (http://www.pensionsadvisoryservice.org.uk/)
• DirectGov (http://www.direct.gov.uk/en/index.htm)

You can also download a copy of a free booklet from The Pensions Advisory Service called Women and Pensions: Know your Pension Rights and Options.

More information
Motley Fool is a treasure chest of good advice on everything financial. And it’s written like your everyday person wrote it, not an accountant! Visit www.motelyfool.co.uk and be sure to check out the section for women’s finance.

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