W@W Topic of the Month

July 2008

Women and Pensions

This is clearly an issue of great importance to many women - and the picture does not make for comforting reading. Women continue to have woefully inadequate pension provision, often remaining financially dependent on husbands, or otherwise able to expect only a meagre income in retirement. Many of us do not even know what we will get when we retire.

Women@Work has organised sessions on pensions and money in the past, and always with a large turnout. It is an issue which will need to be revisited frequently, if only because the legislation continues to change.

On 26th June 2008 Teresa Fritz from Which? Money gave a stimulating and informative session to over 30 women in Inverness, providing a clear and well structured introduction to this complicated topic. Her main message was that women should

• take charge and determine what you will need to live on when you retire
• find out what your pension will be
• and then take steps if it does not measure up to what you think you will need.

Pensions

There are 3 main sources of pensions:

• the Basic State Pension
• the Second State Pension
• Private Pension schemes (employer or personal)

The Basic State Pension

This is paid to everyone provided you have made National Insurance contributions during your working life. If you are married or in civil (same sex) partnership but do not qualify in your own right, you may be able to get a percentage of your husband’s / partner’s pension. The amount you will get depends on qualifying years. It is possible in some cases for years spent bringing up children or caring for others to reduce the number of qualifying years.

However, there are a number of major changes afoot, with the number of qualifying years due to reduce after 2010, but the age at which you can claim your pension due to rise, increasing from 60 to 65 between 2010 and 2020, and to 68 between 2024 and 2046! A handy calculator is available from the Pension Advisory Service  which will tell you at what age you can retire and receive a pension (under the current legislation).

It is important to find out what your Basic State Pension will be – and it is easy to obtain a Pensions Forecast from the Department of Work and Pensions. For those due to retire on or before April 2010, you can get this immediately. Others will have to wait until the new computer system is up and running – currently scheduled for Autumn 2008. Put a date in your diary now to check this – and then continue to check it every year.

The Second State Pension (Previously known as SERP)

This is available to employed people and some carers and disabled people, but not to self-employed. It is based on your National Insurance record, but requires you to have paid a minimum amount (currently £4680 in 2008 to 2009). Teresa emphasised how important it is to meet this minimum if possible. Again, the Pensions Forecast should let you know how much you are entitled to.

In the past, many people were encouraged to opt out of the Second State Pension and pay into a private pension scheme. Many women may not even know if this happened: if unsure ask your employer or phone the HM Revenue and Customs helpline on 084591 50150. If you have opted out, you must ask your employer for a forecast of what your pension entitlement will be.

Private Pension Schemes

This category includes a number of different pension plans, including personal and stakeholder pension schemes, some run by organisations and some for individuals. Some employers contribute, but others do not. Stakeholder pensions have a capped administrative charge of 1.5% year, but other pension schemes may charge more. The government gives tax relief on any contributions you pay into a pension scheme – though once you start to draw your pension it will be taxed.

For people who have worked for a number of companies, each with its own pension plan, you may have lost track of details. Fortunately there is a Pensions Tracing Service which will track down who is looking after the schemes. It is free and definitely worth doing. 

Help and Advice

The issues are undeniably complex – but fortunately there is some excellent and free advice available.

• The Pensions Advisory Service, also known as TPAS, is an independent organisation which provides a great deal of information. It now also has a Women Pension Helpline on 0845 600 0806 if you can’t find the specific information you are looking for on the website.
• The Department of Work and Pensions is the government’s website. It provides a forecast of your State pensions, will trace your private pensions, calculate retirement age – as well as providing guides and links.

Financial Advisers and coaches

Finding out about your pension is only the first step of course. You then may need to make decisions on what to do. Financial advisers can be linked to an institution like a bank or be independent. In the former case, they make a living selling their own products – so are unlikely to offer you an impartial and informed choice. Independent financial advisers (IPAs) offer more scope, but it can be difficult to find one you like. They generally work for commission or a fixed fee.

Teresa Fritz’s advice was to do your homework first, then to phone at least 3 and talk to them, trying to get a feel for them. And always ask beforehand what they charge – negotiate if you want. IFA Promotion Ltd, the industry body responsible for promoting independent financial advice in the UK., provides a website which has a database of all its members, allowing you to sort on certain criteria like gender or geography.

Teresa Fritz highlighted a relatively new breed of adviser: the Money Coach. Like life coaches, these advisers work with you to allow you to research and make the choices specific to you. Unlike IFAs, they do not sell products or take a percentage of your investments. Only a handful have set up business, and most work by telephone. This is for people who want to learn how to take control of their finances, including pensions. Some examples are Wise Money Financial Coaching, Towers of Taunton, or Sharon Rule Coaching (01603 454596).

Further information and links:

Pensions Advisory Service
They also publish a range of guides and booklets, including a booklet on Women and Pensions, which can also be downloaded from the website.

Department of Work and Pensions

Which? Money
The website has a great deal of information, regardless of whether you are a subscriber or not. Subscribers to Which? have access to Best Buys. Which? Has also published a Pension Handbook. A complete guide to saving for your retirement

BBC Your Money website
The Pensions section has clear explanations of the issues.

Financial Services Authority
The FSA regulates all financial products and provides an ombudsman service if you have a complaint. 

Contributed by Susan Kruse (W@W Website Co-ordinator)