They are known as the “onesies”: single women living alone later in life, and as they grow in number, they are becoming a force to be reckoned with. According to experts, however, they are facing a financial crisis, with many sleepwalking into a poor old age because they haven’t saved enough for retirement.
Women have traditionally received smaller pensions than men because of the gender pay gap. They can also have a patchy record of national insurance (NI) contributions if they have taken career breaks to start a family. While married women can ask their partners to plug the contributions gap, single women do not have the same luxury.
The Office for National Statistics says that 43 per cent of women aged between 18 and 49 have never married, compared to only 18 per cent 34 years ago. At the same time, a rising divorce rate is largely being driven by the over-45s, many of whom separate once their children leave home. Divorcées are particularly at risk of pension poverty if they have previously depended on their husbands’ incomes.
“The 1950s male-breadwinner model is alive and well in 2016
A high number of stay-at-home mothers sacrificed pension contributions while they raised their children, according to a report from the Fawcett Society. The feminist think tank warned that many women are “putting everyone else’s needs before their own” and still think that pensions are their husband’s domain.
Sam Smethers, the chief executive, says: “There are some really strong gendered attitudes being displayed here, with many of the women we interviewed not confident when faced with decisions about pensions and often asking men for advice.
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“The 1950s male-breadwinner model is alive and well in 2016.”
Exacerbating the problem is a recent change in the state pension age, which will rise to 65 for women by November 2018. Fidelity International, the investment group, estimates that from now to 2018, only 80,000 women will receive the new flat-rate state pension which came into effect in April, compared with 390,000 men.
By October 2020, the state pension age will have risen to 66 for both men and women. This wouldn’t be such an issue if women planned to work longer, however research by Aegon, the pension firm, shows that women typically want to retire aged 64 (a year earlier than men).
There is also the danger of the unexpected. Helen Garlick, 57, right, had to withdraw her pension early after being diagnosed with cancer. “It changed my whole perspective about the future,” she says.
Research by Fidelity suggests that one in four women do not know the value of their pensions. Figures provided for The Times by Sanlam, the wealth manager, suggest a far higher proportion, with 58 per cent of women who are within five years of retirement saying that they are financially unprepared for the day they give up work. Elliott Silk, the head of employee benefits, says: “The fact that over half of women do not know how much is in their pension pot triggers the alarm: we are in danger of a retirement black hole with women more likely to be left out of pocket.”
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Experts also argue that married women should have an independent mental-ity when it comes to their pensions. Shainaz Firfiray, an assistant professor at Warwick Business School, says: “Given that women have longer life expectancies than men and because of the possibility of divorce or a partner’s death, it is important for women to make savings and to plan for retirement in the event that they are left alone.”
The first step is to check your national insurance contributions. You need ten qualifying years to get any of the new state pension, but 35 years of paying the full rate to get the full amount, now £155.65 a week and guaranteed to rise by the highest of price inflation, earnings growth, or 2.5 per cent until 2020. You can get a record of your contributions from HMRC.
You should think about paying voluntary NI contributions to achieve the ten qualifying years or to maximise your new state pension. Don’t discount yourself because you’ve been unemployed, ill or spent time caring for children or parents because you can still get credits towards the new state pension. However, these contributions can be made only before you reach state pension age, so check when that day will arrive. Kate Smith, the head of pensions at Aegon, says: “The state pension age has become a movable feast so there’s no point second guessing it. If you do have a gap in your record, it may be well worth paying the contributions to get the full state pension because it is guaranteed income that will increase up to 2020 and is unlikely to be frozen beyond that. It depends on whether you have enough spare cash at your disposal.”
You can obtain your new state pension statement by ringing 0345 3000168 or from the gov.uk website.
The situation is a bit more complicated if you have been divorced. If you reached your state pension age before April 6 this year (and were divorced before then), you may be entitled to use the NI contribution record of your ex-partner to boost your state pension but you lose this right if you remarried before reaching state pension age.
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If you divorce after April 6, it is possible to claim a share of an ex- partner’s protected pension through a pension sharing order (PSO) granted by a court.
Track down your long-lost funds
If you have worked more than one job, then the chances are you have lost track of a pension that could add thousands of pounds to your retirement income. The good news is that the department for work and pensions has finally digitalised its pension-tracing service, meaning users no longer have to wait three or four days to get the information they need.
Yvonne Mavin, who works at Southbank University, tested out the new service and within two weeks uncovered details of a £10,000 pension with Aviva. The 59-year-old says: “I recently started planning for my retirement, and have been trying to work out what I’ll get and where from. I had actually put off trying to trace my pensions because I thought I would need lots of details. But when I got round to doing it I was shocked how easy it was, and I now have three pensions.”
Six ways to boost your savings
Make sure you are ready for what could be the best years of your life by following these steps to a better pension:
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1 If you are still working, auto-enrolment should mean that you are signed up to a company pension but the contribution rates are probably very measly. The Pension Quality Mark, an industry gold standard, is awarded only to schemes where contributions are at 10 per cent, of which 6 per cent comes from the employer. Industry experts say that 15 per cent of your earnings should ensure a comfortable retirement.
Try to increase your contributions to make the most of money from your employer and pensions tax relief (while it lasts). It also can’t harm to ask your employer if it will raise its contributions if you raise yours.
2 Consider delaying receiving your personal pension because this will give your pot more time to grow and annuity rates are more favourable for older customers. Make sure the fund has a more conservative investment strategy, with a higher ratio of fixed income to equities, in the decade before you retire.
If you are reaching state pension age now, deferring your pension for at least a year results in a 5.8 per cent boost, but you may lose out if you don’t live very long.
Experts calculate that adding 17 years, plus the number of years you wish to defer for, to your state pensionable age should suggest the age you would need to reach to make deferral worthwhile. So, if your state-pension age would be 66 and you deferred retirement for two years, you would need to live to 85 to get your money’s worth.
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3 Keep reviewing your workplace and personal pensions to make sure you are not paying too much in charges. Any fees above 1 per cent are considered steep, and many historical funds also pay so-called trail commission to financial advisers. Switching company and bringing all your pots together will reduce costs and stop commissions.
4 Make sure your pensions are invested appropriately. You do not want to be overly exposed to a markets crash just before retirement with no time to make up the loss.
Lifestyling is a common way to ensure that as you approach retirement your fund has more fixed-interest investments, which are safer than equities.
5 If in doubt, consult a reputable financial adviser; you can find one through unbiased.co.uk. Bear in mind that fees vary, from 1 per cent to 4. 5 per cent, and people with pots of £40,000 or less may pay 5 per cent, which makes it barely worthwhile. Pension Wise, the government website, provides free general guidance.
6 There are other tax-efficient vehicles you can use to save for your retirement. A self invested personal pension (Sipp) allows you to decide where to invest, but is not an option for the faint-hearted, and it is worth consulting an adviser if you’re inexperienced with investments.
It can be useful if you choose to take advantage of the freedom to access a pension pot early, meaning you can take an income and keep the rest invested in the hope of achieving further returns.
The individual savings allowance (Isa) lets you invest £15,240 this tax year, in either cash, stocks and shares, peer-to-peer savings or a combination of all three. Your company may also offer a workplace investment scheme in the form of save as you earn (SAYE), share incentive plans (Sips) and Workplace Isas. All essentially offer tax breaks to encourage you to invest in the company. Just be careful not to put too many eggs in one company’s basket.