Article | Fabulous Women

Women's Pensions

Posted on 12/11/2018

Women's Pensions


'When I'm 64'

Last Tuesday, the State Pension age for women rose to 65. So, if you are 64 or younger you have missed out compared to your older friends!

The equalising of the State Pension age for men and women has created financial hardship for many women. It began in 1995 when legislation was passed to gradually bring the State Pension age for women in line with men. Women born in the 1950s were most affected. For women aged between 35 and 45 in 1995, retirement seemed a long way off and it was difficult to argue with a change that was justified by a broader move towards sexual equality.

The problem came in 2011 when the government accelerated the process of equalisation and therefore made some women, particularly those born in the mid-1950s, wait much longer for their State Pension. For a woman aged 57 in 2011, it meant waiting until 2020 to receive the State Pension at age 66. Many women in their late 50s were not in a position to easily replace the income they were expecting to receive. Retirement plans had already been made or may have been forced on those who had been made redundant or had taken on caring responsibilities.

It is estimated that 2.6 million women born in the 1950s have been affected with every year's delay costing them up to £8,000 in retirement income.

On top of this, women generally have less private pension savings than men. Recent research by the Chartered Insurance Institute (Note 2) disclosed that the average 65-year-old woman has £35,800 in her pension, compared with £179,000 for the average 65-year-old man.

So far, the Government has resisted arguments to help women who have lost out financially. But, the WASPI campaign continues (see note 1).

New State Pension

The pension environment for women also changed with the introduction of the New State Pension. Since April 2016, the State Pension has been based solely on how many years National Insurance Contributions (NIC) you have paid. To receive the maximum State Pension you need to have worked for 35 years paying NIC or have received NIC credits (for example, by bringing up children). Under the previous system, a married woman had the option of claiming a pension of 60% of her husband's State Pension based on his NIC contributions.

For many women, particularly those who are married and approaching retirement, the new system may not be as generous as the old. And, you have to wait longer for it!

One answer is to become self employed (you only need two clients) and to pay Class 2 NIC. The current rate of NIC is just £2.95 per week or around £150 per year. Each year you are self employed and pay Class 2 NIC will earn you an extra £230 per year in State Pension. This extra pension will be paid every year for the rest of your life.

If you have children under the age of 20 in full time education you should also make sure you claim Child Benefit. There is a misconception that if one spouse or partner earns over £50,000, and therefore Child Benefit is withdrawn, that there is no point claiming Child Benefit. This is wrong! Only by claiming Child Benefit will you receive NIC credits towards your future State Pension.

Finally, if you are employed part-time your employer will only deduct NIC if your earnings are over £6,032 per year. Without an NIC deduction you will not earn 'qualifying years' towards your State Pension.

Note 1: WASPI (Women Against State Pension Inequality). They have a good website

Note 2: They have an extremely informative website branded "Insuring Women's Futures"

Back Author : Richard Owen

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