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The pensions lifecycle: How women can save enough every step of the way

Paloma Kubiak
Written By:
Paloma Kubiak

This Pension Awareness Day (Friday 15 September), the main question is, are you saving enough? As women, we know that pensions gaps do exist, but we shouldn’t just accept this.

There is more than one approach to ensuring you can have the life you want in retirement but for most of us, how much you contribute to your pension plays an important role.

Through all stages of life, there are ways you can act to maximise your savings, from the first day of your professional life right through to retirement.  Here, we explore the options you have throughout your life and career:

20s to 30s: Do something your future self will thank you for

It won’t feel like a priority, but this is the time to set up good money habits.

By starting early, you give your savings a lifetime of growth in a tax-protected environment. The effects of time and compounding of interest could see the value of your pension pot grow exponentially.

Even just making the minimum contribution will make a difference.

30s to 40s: The ‘make or break’ decade

Here is where it starts to get complicated. Career progression can mean it’s possible to make greater contributions but with mortgages to pay, families to raise and a lifestyle to maintain as the cost-of-living rises, this can be difficult.

However, as women, sometimes there is a need to be selfish, even when you have little time to think of yourself. If you have taken time out of work, make sure your National Insurance contributions (NICs) are maxed out so your state pension entitlement is as good as can be.

Claiming child benefit is a must even if you earn more than the child benefit threshold, as this counts towards your NIC years and helps to ensure you receive the maximum state pension entitlement at retirement.

This can also be the time where women start a venture of their own. For some entrepreneurs, they think of their business as their retirement plan, but you should never put all your eggs in one basket.

Get advice to find out the risks, and consider all options. Some pension products allow you to purchase property where it relates to the business. This can also reduce your corporation and income tax burden, so can be a sound financial move.

40s to 50s: It’s ok if it’s not all on track

At this stage, relationships, family life and business may be settled. But it’s ok if they aren’t.

The disparity in pension savings often becomes more obvious in this decade due to events like a relationship breakdown. If this happens, pensions should be an important part of any discussion about financial settlement as a part of your respective assets and accumulation of wealth.

A trusted financial advisor will help you to understand the options available, taking away the financial pressure and providing you with peace of mind, so that you can focus on your needs.

50s to 60s: Prepare for the unexpected

Retirement may well be in sight now. While you may be one of the few fortunate enough to take early retirement by choice, one in four women leave work because of menopause and this has an impact on pensions gaps.

This kind of life event can be hard to plan for, but a good plan should be flexible enough to allow you to make changes if needed.

For others, you could be approaching the final stretch of saving for retirement and making focused attempts to boost your savings where possible.

It’s also not that rare to have reached this point and not thought about retirement. But it’s never too late to start – the right advice can help you put a confident plan in place.

60s onwards: Know your options

You made it. These are the peak years for retirement. The state pension becomes available at the age of 66 (assuming full NIC contributions of 35 years), or you may choose to defer your pension until a later date.

Your pension is very tax efficient, so you may decide to draw your retirement income from other sources first, and save your pension for your later years which could see the closure of any gaps.

If you have a defined contribution pension, you may consider other financial strategies beyond pension such as investing your lump sum in a different investment vehicle or setting up a trust for the benefit of others.

The focus then will be on longevity of your pension, ensuring that the funds last for as long as you need them, providing for your long-term care, and then after, providing for others when you are gone.

Your pension usually does not form part of your estate for inheritance tax calculation purposes, so you may still prefer to use other means to support your retirement income before drawing on your pension.

Whatever age or stage you’re at in life, it’s never too late to start saving towards your retirement or saving more to close the gaps to make sure you have the later life you deserve.

Lesley Mackintosh is founder of Independent Women