Consider this: in 1900, the average life expectancy for a woman was just 50 years. Today, it’s 81 years of age.
Thanks to advances in living conditions, diet and medical care, we are all living longer – but few of us stop to think what impact this will have on our later lives.
According to a study by Public Health England published in April 2016, women aged under 65 are likely to spend almost a third of their lives in retirement, such is their future life expectancy.
This might sound like a blissful way to kick back and relax for a few decades, but it means most women will have to commit much more to their pension than they realise – or spend many years having to cut their cloth extremely tight.
When do I need to start a pension?
When it comes to retirement planning, the key is the earlier, the better. Even if you can only afford to put a small amount into a pension scheme or savings fund each month, over time that nest egg will grow.
Financial planning is particularly important for younger women that are hoping to have a family, as the financial constraints of maternity leave and more mouths to feed can affect your ability to pay into a pension.
You also need to consider what financial outgoings you will need to cover during retirement. If this part of your life is longer, you are likely to want to enjoy it by taking holidays, eating out and such like.
You may still have financially dependent children. You may still be paying off your mortgage. You also may want to consider saving enough to cover any long-term care needs.
Don’t just plan to get by; make financial provision for a fulfilling and secure retirement.
How much will I get?
The amount you receive will depend on a number of factors – when you start paying in, the pension product you choose, your salary, and the size of employer contributions to your fund, to name a few examples.
There is a basic state pension available to those of retirement age, but it is minimal; the current maximum allowance available through a state pension is £119.30 per week. Most people choose to ‘top it up’ by contributing to a private pension scheme.
Even Auto enrolment workplace schemes might not be sufficient to give you adequate retirement funds, as the current required contributions are very low.
When do I pay tax on pensions?
Another important thing to consider is any tax you may need to pay on your pension during later life. In April 2015, the UK government introduced new regulations making it easier – and cheaper – to make lump sum withdrawals from your pension
However, the relaxation of pension taxation regulations has caused concern among some industry professionals, who believe it encourages people to eat into their retirement savings, and could leave them with a shortfall at a later date.
It’s worth noting that there is a £1.5 million lifetime allowance limit on the total value that can be drawn from your pension scheme, either as a lump sum or regular instalments, without incurring additional charges.
If you’re unsure about your pension provision, or if you are making the most of your tax allowances, our team will be happy to help.
If you found this article useful, you may enjoy our recent blog “Lifetime ISA: What it is and Who it’s For”
The Financial Conduct Authority does not regulate wills, taxation and trust advice.
Levels and bases of reliefs from taxation are subject to change.
The value of investments can go down as well as up and you may not get back the amount invested.