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Money for Life work in partnership with the Money Advice Service, an independent organisation set up by government. Money AdviceService provides free, unbiased money guidance across the UK to help people make the most of their money.  If you have a question or need help, you can chat to them here.

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Make 2020 the year to start building your pension

By Alice Merry, host of the Feminist Finance Podcast.

In honour of Women’s History Month, which happens annually on throughout March, we’re dedicating Money for Life to women and finance. Throughout March you’ll see some useful and insightful female-focussed finance content.

Women in the UK retire with just a fifth of the pension pot that men do. The gap in men’s and women’s pensions starts early and grows throughout our lives as a result of lower pay, financial pressures and time spent out of employment to care for family members.

The good news is that the gap is slowly closing, and it is now estimated that 57% of women are adequately prepared for retirement. But that leaves 43% of us set to struggle in retirement. You may have decades of work ahead of you, but the best time to make sure you are prepared for the future is now.

The earlier you pay in the better

That’s because any money you put aside in your pension now will be worth a lot more than money saved just before you retire. Several factors help multiply your pension.

First, if you are employed and have a workplace pension, your employer is obliged to top up your pension contributions.

Secondly, pensions benefit from tax relief. In short, this means that if you have earnings above a certain level, the government tops up the money you pay into your pension by 20% or more! Finally, as the money in your pension will be invested over your lifetime, those investments have the chance to grow over that time (though you can’t be sure that they will).

With that in mind, what steps can you take today to protect and build your pension?

What you can do if you are employed

If you are employed, make sure you are enrolled in your workplace pension. The good news is that in the UK employees are automatically enrolled in a workplace pension as long as they are at least 22 years old and earn over £10,000 per year under the current rules. However, all employees can opt-out of pension contributions.

Remember that if you do opt-out of your pension, you’ll also lose out on your employer’s contribution and on top-ups from the government through tax relief! If you have opted out, you have the option to re-join your workplace pension.

If you are already paying into a workplace pension, do you know how much you are contributing and how much you have saved so far? Take a look at your payslip and any information from your workplace or pension provider. If there is anything you don’t understand, you can ask your HR department to tell you who your pension advisor is and set up a meeting with them. You can also calculate your pension contributions and get impartial advice on your pension (including through WhatsApp) from the Money Advice Service.

What about if you are self-employed?

If you are self-employed, you are not alone. Women and young people in the UK are increasingly likely to be self-employed. Almost 10% of people between the ages of 22 and 30 work as entrepreneurs, freelancers, gig economy workers or contractors. Although men are still more likely to be self-employed, the number of self-employed women is increasing at more than twice the rate of men since 2008.

Being self-employed offers flexibility and the satisfaction of being your own boss, but it also comes with risks. One of those risks is that nobody makes sure you sign up to a pension. Self-employed workers are not automatically signed up to a pension and do not benefit from employers’ contributions.

However, the good news is that you can contribute to a private pension plan and benefit from tax relief. If you own a business, you can also benefit from tax advantages through your pension.

If you are self-employed, take a moment this International Women’s Day to look into signing up for a private pension, so that you are both prepared for the future and able to take advantage of the tax benefits!

What about the state pension?

The state pension provides regular payments during retirement to everyone who has paid enough in National Insurance contributions through their working life. At the moment, the full state pension is £168.60 a week. For many people, that is not enough to live the life they hope to in retirement, so workplace and private pensions are still important.

Your pension also has an impact on the world around you

Pensions are important to support us in old age, but the way that pensions are invested also has an impact on the world around us. You can call up or email your pension provider or your HR department and ask them about how your pension is managed.

Perhaps you want to know if they have a policy to make sure the investments that they make on your behalf don’t damage the environment or don’t contribute to animal cruelty. You might want to know if they look into the number of women on the boards of the companies that they invest in. You can ask them about whatever matters to you and help put pressure on pension providers to manage our money in a way that benefits our communities and the planet.

This month, our expert content comes courtesy of Alice Merry, a researcher, campaigner and consultant for a fair and sustainable financial system. She is the host of the Feminist Finance Podcast.

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Money for Life work in partnership with the Money Advice Service, an independent organisation set up by government. Money AdviceService provides free, unbiased money guidance across the UK to help people make the most of their money.  If you have a question or need help, you can chat to them here.

Launch Chat

Chat to the Money Advice Service
Monday to Friday, 8am to 6pm
Saturday, 9am to 1pm.