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BLOG: Ladies, do you truly know your pension?

BLOG: Ladies, do you truly know your pension?
Your Money
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Your Money

Career breaks, caring responsibilities and the cost-of-living crisis are all impacting women's pension pots. Here are five tips to maximise your contributions.

Cost-of-living pressures can make squirrelling away retirement savings tricky, but there are some simple steps that everyone can make to keep the focus on saving for your future.

That’s even more important for many women, who on average face more disrupted career paths, which contributes to the gender pension gap.

But the onus mustn’t just fall on women. Improved education on how to support women to engage in their pension early is also a must. This, combined with policy changes, will play a crucial role in helping all women actively take control of their pensions and start thinking about future savings decisions.

Here are my top five pension tips:

1) Find out what state your pension savings are in

Knowing what you have saved to date, particularly if you’ve moved jobs a lot and have several pensions with various employers/providers, is key. Most employers will provide information about your workplace pension scheme, including contribution options, investment opportunities and strategies that are being used.

The MoneyHelper website, a Government-supported resource, can also be very useful. It offers a wealth of information on pensions, including state retirement forecast checks, best-buy comparisons, and pension calculators.

2) Consolidate your pensions for easier management 

Tracking down all your pension pots will help you have better control over your savings, understand their worth and assess whether you’re on track with affording your plans for retirement.

However, if consolidating, make sure you don’t lose valuable guarantees attached to older pension schemes, such as guaranteed growth rates or annuity rates: where those guarantees exist, it might be worth retaining that pot.

Many modern pension providers offer consolidation services, making the process simple.

3) Try not to pause contributions… it can be harmful in the long run

While the cost-of-living crisis might make pausing pension contributions seem tempting, it could harm you in the long run. Pausing contributions means you’ll miss out on valuable employer contributions and the power of compound interest.

While Scottish Widows research finds 19% of men start paying into their pension by age 22, just 14% of women do this, signalling a clear opportunity for more young women to start saving into their pension from an early age.

For example, a woman aged 20 contributing £278 per month for a total contribution of £153,000 over the course of her career can harness the power of compound gains and end up with a retirement pot of £250,000 in today’s money.

However, starting off later, to achieve the same goal, requires staggeringly different inputs.

4) Factor in life events 

Maternity leave and childcare are significant factors impacting women’s pensions.

It’s always worth checking if your employer will continue pension contributions for you during maternity leave. It’s not mandatory, so find out its policy before you start preparing.

Ideally, aiming for small, consistent contributions throughout your career can help plug the career break gap in contributions. Even a 2% extra contribution in your twenties can significantly offset the impact of career breaks in your thirties. It’s important, where possible, to maintain your earnings and pension contributions as much as you can.

5) Divorce and pensions 

Many women often overlook pensions during divorce settlements. A whopping 83% of women say their pension assets weren’t even considered in their divorce settlements.

It’s important to treat your pension as an asset equal to your house and understand you’re entitled to 50% of your spouse’s pension. If you are unsure, this is an area about which to seek professional advice to ensure you receive a fair share of the pension should a relationship end.

However, if unmarried, know that you are not entitled to your partner’s pension. Regardless of whether you have children together, it is one of those things you have to think about in your relationship to protect yourself.

Jackie Leiper is managing director at Scottish Widows

Related: WASPI women ‘owed’ £10bn after state pension failings