Retirement: 1 in 5 women to retire on only the State Pension, how can you avoid being one of them?


1 in 5 women to retire on only the State Pension, how can you avoid being one of them 150pxNew research has shown that one in five women, retiring in 2014, will only have the State Pension to live on.

The figures from the Prudential show a stark contrast between the retirement prospects of men and women:

  • 20% of women have no pension savings and will rely entirely on the State Pension when they retire, the figure drops to just 7% for men
  • Women are more reliant on the state, with 42% of their income made up by the State Pension, compared to 28% for men
  • When it comes to company pensions the figures switch around; on average, workplace pensions will make up 27% of women’s income in retirement and 42% for men

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Alarmingly, given many people’s reliance on it, knowledge of the State Pension seems to be poor:

  • 39% of people either don’t know what the State Pension is worth, or think it is more than the current £113.10 per week
  • 17% of people over estimated the State Pension by nearly £1,000 per year

So, how can you stop yourself joining thousands of others and relying solely on the State Pension to fund your retirement?

1. Join a workplace pension – part 1

Over the past few months it’s been hard to avoid Karen Brady, Theo Paphitis and Nick Hewer telling you that “they’re in”.

Whilst the adverts may be wearing a bit thin, the message is important.

All employees aged over 22 and earning more than the weekly or monthly equivalent of £10,000, will be automatically enrolled into a workplace pension (if they have not already been so) over the next few years.

You and your employer will pay in and taking advantage of the new rules will help many people build up money in a separate pension and reduce your reliance on the state.

2. Join a workplace pension – part 2

Even if your employer doesn’t have to automatically enrol you into a pension for months or even years to come, it’s worth checking out if they already offer a scheme.

We know of one employer who doesn’t have to comply with the new rules for over two years, but they already offer a pension to their staff. The problem though is that no one has joined, despite their employment contract stating they are entitled to; that’s free money the staff are throwing away!

Check what you’re entitled to, you might be surprised.

3. Start your own pension

If there are no options at work then consider starting your own pension.

Any money you put in a pension will get tax-relief, which means for every £80 you contribute £100 will be credited to your ‘pot’,  i.e  If the net contribution is £80 then the gross contribution, with the addition of tax-relief, is £100. What’s more, if the proposals outlined in the Budget become law, you will have more options to take an income from your pension pot when you retire.

Pensions are flexible these days, so if you need to stop contributing when you are automatically enrolled then you can usually do so without penalty.

At least you will have made a start, picked up some tax-relief and got into the savings habit.

4. Track down old pensions

With people changing jobs so frequently these days it’s easy to lose track of your pensions.

Most people aren’t saving enough in the first place; losing track of any money you have put aside will only make matters worse!

If think you have paid into a pension, but have lost track of it the Pension Tracing Service can help, click here to visit their website now.

5. Don’t underestimate the State Pension

The Prudential research found many people overestimate the value of the State Pension. In our experience the opposite is also true, hardly surprising perhaps given how complex our State Pension system is!

From 2016 the flat rate State Pension will be introduced. This will pay around £155 per week to anyone who has paid National Insurance for at least 30 years and should make things a little easier to understand.

The flat rate State Pension is hugely valuable, especially when it will effectively be tax-free, now that the Personal Allowance is now £10,000 and looks set to rise further. It is therefore vital that you ensure your National Insurance record is as complete as possible and that you make up any gaps to get the full 30 years credit.

6. It isn’t all about pensions!

Anyone who tells you retirement is all about pensions is wrong.

Of course, they do have lots of advantages; tax-relief and employer contributions to name just two, but other options, such as ISAs (Individual Savings Accounts) also have a place too.

Whilst you don’t get tax-relief on ISA contributions, there are no restrictions on how you access your savings and any income you take in the future is free of tax.

For most people a combination of pension and ISA is the right way to plan for retirement.

Don’t rely on the state

Can you happily live on £7,500 per year?

Yes: Then you don’t need to put any extra money aside for retirement. At the same time we’d politely suggest you check your sums again, as most people need more than £625 per month to live on.

No: Then you need to start building up your own pot. Start by take advantaging of the help given to you in the form of tax-relief and employer contributions and then look at the best places to save extra money.

Planning for retirement isn’t always easy and our team of Independent Financial Advisers are here to help.

If you are worried that you will rely too much on the State Pension when you retire and would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email