The fact that women live longer acts against them when it comes to finding the best annuity rates. In fact the retirement income of a woman is on average around 50% less than that of a man, given that on average men traditionally earn more than women. From the pension providers point of view, this discrimination is justified given the fact that women tend to live longer. Not much comfort for women on lower incomes though!
Moreover, it is estimated that nearly two thirds of pensioners in poverty are women. Because of this, it is even more imperative that women shop around for the best annuity deals on the market. The situation is made worse given the fact that women save less than men, as well as being more likely to take a career break.
So to deal with this, here are some pension and retirement tips for women…
- The first rule, which applies to all pensioners really, is don’t rely solely on the state or your husband for your retirement income. With the state pension a little over £90 for one person and £140 for two people, you should try to make provisions for yourself if at all possible. Also relying solely on your partner can also be a risk because there is always the danger of a divorce.
- Save for a pension early. This is easily said, but is rarely followed, as it can be hard for someone to give up some of their disposable income to put aside for the future. In fact women should be more aware of pension provision in their twenties because of the possibility of taking a career break later in life. Just a delay of five years in starting to save (from 25 to 30) can reduce the pension pot by 33% in some instances.
- Save as much money as possible. Again easily said, harder to implement in reality. As a ball park figure, experts say you should put away half of your age as a percentage. So if you are 25, put away 12.5% of your income, including any payments made by your employers. This should result in a retirement income equivalent to 66% of your salary.
- Sign up for employer pensions, especially those where the employer makes a contribution. Although they can vary in how beneficial they are, putting some money away is better than putting none away.
- Women that take breaks in their career should opt for the home responsibilities protection (HRP). These will be credited should you be on income support, in receipt of child benefit or if you get a career allowance. To get a basic pension from the state you will need to have built up national insurance contributions NIC’s – the minimum is current 39 years worth of contributions, although it is scheduled to go down in 2010. HRP reduces the figure to 20 years. You can also pay voluntary NIC’s if you are off work for any other reason.
- You can even buy back missing years from NICs, but it must be the six years immediately after your career break.
- Keep paying into your pension even if you are not earning. Although this sounds hard, it will benefit you in the longer term. Other people such as your husband can do this for you if possible.
- Take a look at the state of your pension fund every 12 months.
- Make over payments. If you come into some money, why not make additional pension payments, you can do so up to £235,000 per year.
- Shop for an anuuity by using the open market option. This is vital if you are to ensure you are getting the best annuity rates. The difference can be as much as 15% between thr worst rates and the best.
