What EVERY woman needs to know about her pension

Jo Thornhill
13 March 2020

There has never been a better time for young women to start saving into a pension. Read our guide to pensions and retirement planning to find out why


Not starting a pension sooner is the biggest financial regret for older women. So whether you are single, in a relationship or married, it is vital you take charge of your own retirement saving if you want to reduce the risk of retiring stressed and worried about money.

The Great British Retirement Survey (GBRS) of 10,000 consumers of all ages, conducted by interactive investor (Moneywise’s parent company) and Moneywise, found more than a third (36%) of non-retired women regret not saving enough and 33% have no idea what their income will be in retirement.

This compares to 28% of non-retired men regretting not saving enough and 19% unsure of income levels once they give up work. Overall, not starting a pension sooner is the biggest financial regret.

Moira O’Neill, head of personal finance at interactive investor (ii), says the findings reflect the issues women face during their working lives.

She says: “Women are mindful they might need more ready cash because the gender pay gap often means they have fewer financial assets than men. Although efforts have been made to allow parents to share childcare, in many cases it is women who take on the bulk of this work. They end up bearing the consequences of the ‘motherhood penalty’ in pay progression and retirement savings. Whatever the reason, it is important for women not to let their retirement savings fall by the wayside.”

Why is the pensions system failing women?

The gender pensions gap is a staggering 40%, according to consultancy firm Mercer, and the main problem is the gender pay gap, which still stands at about 9% for women working full-time. The pay gap is even wider (15%) for workers aged over 50, according to figures from the Office of National Statistics (ONS).

High-profile cases, such as that of Samira Ahmed, the broadcaster who recently won an equal pay case against the BBC, are putting pressure on employers and policy-makers. But while the pay gap remains, women will save significantly less in their pensions.

Auto-enrolment has boosted pension take-up, with 87% of workers now in a company scheme, compared to 55% in 2012, according to the ONS. Yet one in 10 younger women opts out. Plus, experts say the minimum savings level is too low.

Analysis of auto-enrolment schemes by insurer and pension provider Royal London shows a spike in opt-outs by younger women (aged 22 to 29) at almost 11%, compared to 8% for young men. This is most likely driven by women facing other costs, such as childcare or saving for a home.

Steve Webb, former pensions minister and partner at pensions consultancy Lane, Clark and Peacock, says auto-enrolment is a good start but he fears the minimum savings levels will not lead to a comfortable retirement. He would like to see eligibility widened to include younger and lower-paid workers, and employers forced to pay in more.

“The worry is employees see they are in the pension and feel that is ‘job done’, they can forget about it,” says Webb. “But even at market returns of 5% for those who are on average earnings, this won’t add up to a big pension and will mean a large drop in income at retirement. Add in the fact that many women will take time out of the workplace to have a family and this further dents savings levels.”

Many women will have gaps during their working life to raise children or to care for elderly parents. The Insuring Women’s Futures programme, run by the Chartered Insurance Institute, says women face many challenges in the workplace – and outside – in terms of the pay gap, flexible and part-time working, divorce, childcare costs and low pay.

Jane Portas, co-founder of Insuring Women’s Futures, says: “There is a big case for change. If you make the changes to help women save and be financially independent, it is a win-win situation.”

She adds: “The large pension deficit for women is a big risk for future governments and the economy.”

What can women do to redress the balance?



How do you want your retirement to look and how much do you need to save to get there? Independent financial planner Susie Hill, based in St Albans, Hertfordshire, says the first step is to realise you must take charge of your own financial arrangements and take action.

“The state pension has changed, so women need to build up an entitlement in their own right. And you can’t rely on a partner,“ she points out. “If you are in a couple, are your long-term savings equal? How would you manage in old age if there was divorce, ill health or your partner died?”

When returning to work after children, for example, negotiate the best pay and focus on pension saving as a priority. If you are in work, ask your employer for a pay review to ensure you are being paid fairly. When you receive a pay rise or bonus, consider putting any increase straight into your pension.

Talk to your partner

One third of couples only discuss money once a month, according to findings in the GBRS. But communication between partners is vital, particularly if income and earnings are not equal, to ensure that long-term savings are fair.

“Women who have taken time out of the workplace are often anxious about their savings,” says Alice Douglass, financial adviser at Grosvenor Consultancy in Bristol. “Couples should discuss their retirement plans and ensure savings are spread as equally as possible. Could some of the household budget be put into a Lisa for the woman, for example?”

Make small changes

Figures in the GBRS show that even small extra savings each month add up to a big difference over the life of a pension. Younger women, who think they may take time out of the workplace to have a family, should try to save harder in the early years of their career. This can go some way to compensating for lost years of saving (see table above).

O’Neill says: “Even relatively modest additional contributions really add up. A woman who starts making pension contributions from age 22, stops them at 30 – the average age of a first-time mum – then resumes a decade later at 40, could be almost £35,000 better off at retirement had an extra £25 a month been paid in during the period she worked.”

“My pension pots are small, but hopefully I have time to catch up”


Caitlin Banks, who is 36, says if she could advise her younger self she would say: “Save hard in a pension before you have children.” Marketing executive Caitlin, who lives in Surrey with husband, Stuart, and their two daughters Tilly, 10, and Isabelle, seven, regrets that her long-term saving stalled while she was focusing on caring for her girls.

Although Caitlin is now working part-time for a company in West London and has been enrolled in the firm’s pension scheme, she worries about her pension saving to date.

“Saving was never a priority when I was younger,“ she

says. “I did start a couple of pensions in previous jobs, but I lived abroad and then I had children. It means my pension pots are small.”

Caitlin decided to freelance when she returned to work. But as this was part-time, it also meant a dip in income compared to her previous job so there was little money to save. She went back into the workplace in 2017.

“At that point it was a priority to start saving in the pension scheme. I have started at the minimum level, but my plan is

to increase this,“ she says.

“One of the benefits for me is that I had my daughters young, so I have time and hopefully my earnings will increase. I’m not ignoring my retirement planning any more.”

Know your rights during divorce

Divorce can have a devastating impact on a woman’s finances. Pensions should always be taken into account in a financial settlement, but often women overlook the value of a partner’s pension – as they tend to prioritise keeping the family home. 

Pensions can be split or shared so women (and in the majority of cases it is the man who tends to have the larger pension pot) don’t lose out.

State pension

The state pension (worth up to £168.60 a week) is still the bedrock of most people’s retirement income. Its value is highlighted by the campaign of the so-called Waspi women (Women Against State Pension Inequality) who have been hardest hit by the equalisation of the state pension age –  now 65 for both men and women.

Women born in the 1950s had expected to claim at age 60 but this has been gradually increased so that it is now age 65, and will be increased to age 66 by October 2020.

Changes to the state pension and when you can claim mean younger women need to think about their national insurance (NI) record. Women can no longer use the NI record of a spouse for their own state pension, for example; and NI qualifying years if you take time out of the workplace to raise children are only applied up until children reach 12 (down from age 16). You need a minimum of 10 years of NI contributions to claim some state pension and at least 35 years to get the full rate. Find out your NI record at Yourpension.gov.uk.

When can you claim the state pension?

Date of birth

Age state pension age is reached

6 October 1954 - 5 April 1960

66th birthday

6 April 1960 - 5 March 1961

66-plus (plus between one month and 11 months)

6 March 1961 - 5 April 1977


6 April 1977 - 5 April 1978

67-plus (plus between one month up to 11 months)

6 April 1978 onwards

68th birthday

Source: Department for Work and Pensions

Pensions – where do you start?


Pensions can seem boring and technical: more than one-third of women in the GBRS described money management as a chore, compared to 15% of men. But in reality, a pension is simply a wrapper around your long-term savings. Pensions get the added benefit of tax relief, which is an instant boost to your pot (see box on tax relief on page 70). Unlike other savings accounts or investments, with pensions, cash is locked up – usually until you are 55 – removing the temptation to spend it.

For employees, the first interaction with pension saving is usually automatic enrolment into a scheme at work.

Auto-enrolment into workplace pensions began in 2012, and now all employers are legally required to provide a pension scheme for any staff member aged over 22 and earning at least £10,000 a year. You can opt out of the scheme but, with employers obliged to pay contributions too, it is effectively turning down free cash.

Under auto-enrolment, you pay 4% of your earnings into the pension and your employer pays in 3%; tax relief is then added at 1%, giving a total of 8%. You can contribute more if you wish. The money is invested in stock market-linked funds, bonds and other assets, and should grow over time. Some employers will be more  generous, so talk to HR to find out what you are getting.

If you are self-employed or do not meet eligibility criteria for auto-enrolment, you will need to consider other options. Private pensions are offered by investment, pension and life insurance companies, and you can start with contributions of as little as as £10, £30 or £50 a month. Although you don’t  get the benefit of employer contributions, your money will still be topped up by tax relief.

As pensions are long-term savings, the money is typically invested in stock market-linked investments. Again, the money in a pension is locked up until at least the age of 55.

If you want to take a more proactive role in deciding where to invest your money, a self-invested personal pension (known as a Sipp) may be suitable. These offer the greatest selection of investments including funds, investment trusts and often shares, and can be set up with traditional pension providers as well as online investment platforms such as Bestinvest, Fidelity, Hargreaves Lansdown or interactive investor.

Anyone can save in a pension – and you don’t have to be earning or paying tax to benefit. Non-taxpayers can save up to £2,880 in a pension each year and receive tax relief on the contributions, which increase savings up to a maximum of £3,600 a year.

Lifetime Isas (Lisas), available for those aged 18 to 39, can also be used for retirement savings as well as buying a first home. Lisas allow you to save up to £4,000 a year, receiving a 25% annual bonus, until the age of 50. You can access the funds in your Lisa from age 60.

Tax relief on pensions

Savers in any kind of pension get tax relief on their contributions. This is ‘money back’ from the Government to reward you for saving. The tax relief is paid at your highest rate of income tax.

Basic-rate taxpayers get 20% tax relief. Higher-rate taxpayers get 40% and additional-rate taxpayers get 45%.

So, if you are a basic-rate taxpayer and you were to contribute £100 into your pension pot, it would only cost you £80. This is because the Government adds the £20 on top – only £80 comes out of your pay.

You can pay up to 100% of your earnings into a pension and receive tax relief on the full amount up to an annual limit of £40,000.

Tax relief is usually added automatically for basic-rate taxpayers – for both workplace and private schemes. Higher- and additional-rate taxpayers may need to claim the extra tax relief through a self-assessment tax return.

Income tax rates and pensions tax relief is different in Scotland. Go to Gov.uk/scottish-income-tax to find out more.

For more information, visit Moneyadviceservice.org.uk and Pensionsadvisoryservice.org.uk.

Can you spare £25 a month? The benefits of saving a little bit more

£20,000 qualifying earnings, start investing from age 22, stop age 30, start again at age 40 through to retirement at 67

Annual return




8% auto-enrolment*




8% auto-enrolment with an extra £25 a month employee contribution




8% auto-enrolment with an extra £50 a month employee contribution




Notes: Table does not consider inflation or pay increases and is for illustration purposes only. Figures are calculated based on assumed annual returns with monthly contributions. * 8% auto-enrolment is based on a 3% employer contribution, 4% employee contribution and 1% tax relief. Extra £25 a month contribution based on an additional £20 paid by employee and £5 tax relief. Extra £50 a month contribution based on additional £40 paid by employee and £10 tax relief. Source: The Great British Retirement Survey 2020, interactive investor and Moneywise


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