Pension Facts for women
- We all know it’s hard to save for that distant day when we’ll be kicking back and enjoying a well-earned retirement. But it’s even more distant for women. According to research from insurance broker LV=, the average savings pot for men aged 45 to 54 is £112,000. But when you look at what the average woman has saved by that age, it falls to £56,000. That’s hardly surprising when you consider average earnings. Leading workplace pension provider Smart Pension’s data suggests its female savers are earning over 20% less than their male counterparts, with an average salary of £18,578 a year vs £23,991, even from the age of 20. The State Pension will no longer be enough. Experts today recommend at least £250,000 in a pension at retirement age as a bare minimum. So how can women save enough to equal their male counterparts on the savings front? Here are our top 5 pension saving tips:
Top 5 Tips
- Don’t be tempted to opt out of you workplace pension. All businesses must now offer a pension saving scheme by law, but when you’re not earning a lot, it’s tempting to opt out and ‘enjoy it while you can’. Unfortunately, by doing that, you are not only losing contributions to your pension pot from your own income, you are also missing out on the contribution your boss makes. At the moment, minimum contribution levels are set at 5%, with employers adding an extra 2%. From April 2019, minimum contributions will rise to 8%, with employers throwing in another 3%. While some suggest it’s still not enough, if you start early, over time your pot will not only swell because of what you throw in, it will be invested and these investments are likely to increase by at least 4% annually. It’s a no brainer.
- Up your contribution level when you can. Some pension providers will allow you to change the percentage of income you contribute to your pension pot directly from your pay packet, from say 5% to 7%. Smart Pension’s technology allows its members to change the contribution percentage level from a mobile phone, Alexa or Google Home device, as well via its online portal. It means when you’ve received a nice bonus, or you can just afford to save a little bit more, you can divert that cash directly into your pension where it will be invested on your behalf.
- Keep an eye on your investments. While most pensions will automatically invest your money in what’s called a default fund, which will be selected according to your age, you can opt to increase your level of risk and even self-select funds that you feel might bring a higher level of return than the default. It’s not hard, but it does require an element of research, or advice into the funds your pension provider offers and how the average return compares to the default. Smart Pension allows its members to self-select funds based on risk or ethical position via their phone or online portal. It’s certainly worth thinking about.
- Save for the shorter term too. While retirement might seem a long way off, saving for the shorter term for things like a deposit on a house, is also important. Consider rainy days savings including an ISA or if you’re under 40, a Lifetime ISA or LISA. This is a tax efficient way of saving to top up your pension and it has the advantage that it’s accessible when you need it for a deposit on a house. The LISA allows you to save up to £4,000 and the Government will top it up by 25% up until the age of 50. You can take it all out at 60 or if you want to buy a house, but if you want it sooner you’ll pay a penalty of 25%.
- Become a pro at saving money. Employee benefits are a thing and many employers offer access to discount schemes on everyday shopping or larger purchases. If you decide to use them properly when you spend, instead of blowing the lot on a night out, you can make the decision to tip the money you’ve saved into your pension pot. Smart Pension offers all its member access to its Smart Rewards portal for free. It calculates an average family could save £150 during the course of the year if they use it to the max.
For more information on workplace pensions and auto- enrolment click here