5 powerful ways women can get their pension pot on a par with men’s

A study by Aviva makes sombre reading for women when it comes to their retirement. According to research released in January 2023, women aged between 60-65 years have pension pots that are on average worth just over half (57%) the value of men’s pensions at the same age.

Furthermore, the study also found that the gap between men’s and women’s pensions often starts to widen at the age of 35 years. A key reason for this is the gender pay gap, which tends to widen around this age as many women decide to stay at home or take part-time roles, maybe to look after children or elderly parents.

If you would like to learn about five important times in life you may need to review your pension, please read my informative blog.

As the amount of money that is contributed towards a workplace pension is based on income, taking a lesser-paid role can significantly affect how quickly a pension pot grows. There is good news though if you’ve stopped working or taken a part-time role, as a financial planner could help boost your pension pot so that you can enjoy the retirement lifestyle you want.

As March is the month of International Women’s Day, you may be wondering: “how can I enjoy the retirement lifestyle I want?”. If so, read on to discover five positive actions you could take and how a financial planner could help.

1. Boost contributions into a private pension

Pension contributions typically receive tax relief, which means that in 2023/24 every £100 placed into a retirement fund only costs you £80 if you’re a basic-rate taxpayer. If you’re a 40% higher-rate taxpayer, you will typically only pay £60 and if you’re an additional-rate taxpayer you could pay just £55.

As pensions normally benefit from compound growth, which is growth on the growth already made, this, together with the uplift from the tax relief, means that you may be able to significantly bolster your pension pot in a relatively short amount of time.

While in 2022/23 you can contribute any amount to your pension, the amount that receives tax relief is typically limited to the Annual Allowance. This is £40,000 a year or the amount you earn, whichever is the lower. If you exceed these amounts, you may receive a tax charge.

There is good news though, as the Annual Allowance increases to £60,000 a year or the amount you earn as from April 2023.

2. Pay more into your workplace pension

If you’re enrolled in a workplace pension, then you not only receive tax relief, but your employer also boosts your pot by a minimum of 3% of your qualifying earnings. As some employers may be prepared to pay more than this into your pension as part of your benefits package, you may want to speak with them to confirm whether this is the case.

Paying as much as possible into your workplace pension may mean you get an even greater uplift from your employer, which, together with your tax relief, could provide your retirement fund with a major boost. As a result, you might be able to enjoy a better standard of living when you retire.

3. Consider paying a lump sum into your retirement fund

In 2022/23, if you earn more than £40,000, you may be able to receive tax relief on contributions that you make that are above this amount. This is done using “carry forward”, which allows you to make higher pension contributions and still receive tax relief on them.

This is because carry forward uses unused amounts of Annual Allowance from the previous three years, potentially allowing you to contribute up to £160,000 and receive tax relief (2022/23). As from 2023/24, this could increase to £180,000 a year.

As strict rules apply to carry forward, care must be taken before you contribute to your pension, as getting it wrong might result in you facing a significant tax charge. A financial planner will be able to confirm whether it’s right for you or not.

4. Adjust the level of risk your pension’s exposed to

A pension is an investment, so typically includes assets such as stocks and shares, bonds, and cash. As growth is usually provided by higher-risk assets like stocks and shares, not having enough exposure to them could lower your pension’s growth potential.

As a result of this, your pension pot may not grow to the levels needed to provide the lifestyle you want. Increasing the level of risk it’s exposed to may help to boost its future value, although care must be taken as it will also expose your pension to a greater risk of losses.

This is something a financial planner can help you understand, as well as the level of risk your pension is currently exposed to and the options that may be available to you.

5. Locate lost pensions and consider consolidating them

According to an article by Unbiased in February 2023, UK workers have lost track of up to 1.6 million pension pots worth £19.4 billion. If this includes pensions that belong to you, finding them might be a good way to give your retirement fund a significant boost.

A financial planner could help with this and provide options you may want to consider should you locate a lost pension. This could include consolidating them, as this may help improve their growth potential, reduce their fees, or both.

To learn more about consolidating your pensions, please feel free to read my blog on it.

Please remember that merging pensions can carry risk, so never do so without speaking to a financial planner first. Furthermore, ensure that the financial planner is bona fide so that you don’t fall foul of a potential scam.

Get in touch

As you can see, if you’re wondering: “how can I enjoy the retirement lifestyle I want?”, working with a financial planner could be a shrewd strategy. As an independent financial adviser, I would be happy to help you understand how you could enjoy your dream retirement no matter what happens in your life between now and then.

If you would like to discuss how I may be able to help, please email me at a.douglass@grosvenorconsultancy.co.uk or telephone 01793 766 123. Alternatively, call my mobile on 07525 177 046.

Please note that while I offer high standards of service and ensure that any solution I recommend is right for you, I’m also a busy mum, so work Mondays and Tuesdays only.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Tax levels and reliefs could change and the availability of tax reliefs will depend on individual circumstances.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Leave a Reply

Your email address will not be published. Required fields are marked *