Pensions checklist for women

Woman laughing

If you decide not to read the whole of this blog please at least refer to the Pensions Checklist for Women at the end.

Pension consultants Lane Clark & Peacock have recently ‘put the cat among the pigeons’ with a research paper suggesting that tens of thousands of women in receipt of the pre April 2016 state pension may be entitled to a higher rate of state pension than they are currently receiving.

The total amount owed could be up to £100m.


One of the partners of Lane Clark & Peacock is Sir Steven Webb, previously a Liberal Democrat Member of Parliament and Minister of State for Pensions in the coalition government of David Cameron. In fact Steven Webb was the UK’s longest serving pensions minister so they out to know what they are talking about.

There is a calculator on their website which enables married women to check if this applies to them see

However, relying for your future prosperity on the state has always been a recipe for disaster. This was aptly put by Jeff Rooker, Minister of State at the Department of Social Security in November 1999 when he said ‘Anyone who retires solely on the Basic State Retirement Pension and makes no other provision will, as has always been the case, retire in abject poverty.’

From personal experience I can state categorically that woman in general are better planners and organisers than men; have a better grip on finances and a more realistic view of what the future may hold. However, in my nearly 50 years as a financial adviser I have met very few women who paid much attention to their own, or their partner’s, pension funding.

Why is it so important for women to get to grips with their pensions?

Women reaching retirement age today can, on average, look forward to many more years of active healthy living than their parents enjoyed. And on average women still outlive men of the same age by around four to five years. Women’s lives in retirement should be very enjoyable, active and fulfilling. The proviso is that there is a sufficiently high income to allow for eating out, going to the theatre/shows, holidays and travel to visit children and grandchildren, or whatever is of particular interest to you. 

It should be clear that you cannot rely on the state for the level of income that is required and it is becoming increasingly clear that you cannot rely solely on employer-sponsored pension provision either.  The task of providing a comfortable lifestyle for yourself after the salary cheques have stopped coming in, needs to be seen as one of fairly major proportions.

If you are single

Where you are a single woman through choice, or have become one through divorce, separation or widowhood, it should be fairly clear to you that you are in no different a position from a man when it comes to the need to provide for adequate income in later life. 

Married or in a Civil Partnership

Where you are a married woman, in a civil partnership, or you are otherwise enjoying a long-term relationship with your partner, you may be relying on your husband’s or partner’s pension to provide for you as well.  Whilst this can be true it ignores many of the potential major upheavals in life such as the death of a husband or partner, divorce, separation, redundancy etc. 

These are not events that the majority of people in happy long-term relationships may want to consider, but it is better to do so now rather than if, and when, such an event occurs.  It is particularly important, if you are in a long-term relationship but are not married, to be certain as to whether you have the same rights as a married woman or civil partner under your partner’s occupational pension scheme. 

While this will often be the case it is certainly not a clear-cut situation.  For example, on the death of a male employee the trustees of the pension scheme have discretion as to who will receive the pension fund or income benefits.  They will have no difficulty in paying this to the deceased employee’s wife or civil partner but will often use their judgement where a former partner is concerned. 

This gets very complicated where there is a child by a previous partner, or a previous partner had a longer relationship with the scheme member than you etc.  It is best to be sure of the position now so that if things need formalising they can be.

The death of a husband or partner

Where your husband , civil partner, or partner dies before reaching retirement age, any pension payable to you can be very much reduced over that which would have been paid to you both in retirement. 

For example, if your husband or partner is a member of a good occupational pension scheme you would normally receive, on his death before retirement, a pension of 50% of his prospective pension.  In rough terms that is likely to be only around 25% to 33% of your husband’s or partner’s income just prior to his death.

If your husband or partner is not a member of an occupational pension scheme but is providing for his own pension through a personal pension plan, the situation can be much worse.  Should your husband die before his anticipated retirement age the pension fund may not be anywhere near sufficient for the lifestyle you had planned together.

In both of these circumstances, you will be in a much more secure position if you are contributing to your own pension plan.  After all, the pension that you receive from your deceased husband’s or partner’s pension scheme may start to look quite small when you reach your planned retirement age and your own pension can then be used to top it up.

Divorce and separation

Divorce and separation is another subject that we do not like to contemplate, particularly where the relationship is a happy one, but it is foolish in financial planning to ignore these things. 

Particularly in the case of divorce, you may now receive some benefit from the fact that your former husband or civil partner had a pension.  However, this will be nowhere near the real value of the income in retirement that you might have anticipated had you remained together.

The redundancy of a husband or partner

Another modern problem that we have to contend with is the redundancy of a husband or partner, or the failure of his business.  In both these events pension contributions naturally cease and any resulting pension would be very much reduced from that which you would otherwise expect.

Tax reasons

Even if all of the other reasons I have mentioned are ignored, there are extremely good tax reasons why it is imperative for married women, and civil partners, and others in a long term relationship, to make provision to receive their own pension income in retirement.  

Briefly, under separate taxation you will have your own personal allowance in retirement and income up to this level is totally tax-free to the family.  The personal allowance is currently £12,500 a year for anyone earning no more than £100,000 a year.   In other words if you can produce a pension (including your state pension) of up to £12,500 a year, in present day values, you will receive as a family every penny of that pension. 

The current full state pension is £175.20 a week or £9,110 a year although most people find they have a shortfall because of an incomplete National Insurance record. To increase this up to £12,500 (i.e. by at least £3,390 pa) using an inflation-linked annuity (i.e. a guaranteed income for life) a woman aged 65 would need a pension fund of £143,279. However as 25% of a personal pension fund is currently paid tax-free a pension fund of £191,039 would be more suitable.

You may find these figures staggering but annuity rates have been falling for the last 30 or more years due to a combination of increasing mortality (life expectancy) and low returns from gilts (interest rates). I have also chosen an inflation-linked annuity but there is little point in having a level (non-increasing) annuity for 25 to 30 years. You could use a pension drawdown product rather than purchasing an annuity and this might let you get away with a somewhat smaller fund but I hope you get the point I am making. 

In comparison, if your husband or partner who already has a pension were to earn a further £3,390 a year in pension income he would currently pay tax on that increase in pension of £678 (ie 20% of £3,390).

Where your husband or partner is going to be a higher rate tax payer in retirement the argument for you to make your own pension contributions is even greater.  An additional £3,390 of pension paid to your husband or partner would result in £1,356 of tax being paid on that pension (ie 40% of £3,390). 

Not employed outside the home?

You can still set up your own personal pension plan without any requirement to show earnings for contributions up to £3,600 gross (£2,880 net) in a tax year, which is up to £300 gross (£240 net) a month. Yes, you do still get the tax relief even though you may not have paid tax in any particular year. Naturally, the sooner you start to contribute to a pension fund the larger that fund has a chance of becoming.

Pensions Checklist for Women

1 Please treat pension planning seriously. You need to build up sufficient pension benefits to enable you to live the lifestyle you want during the last 30 to 40 years of your life.
2 If you are under state pension age please obtain a state pension forecast at
3 If you will not receive a full state pension then you should pay for as many missing years as you can afford as it will be worth it.
4 If you are employed, even part-time, please do make sure that you join your workplace pension scheme.  
5 If you are already a member of a workplace pension scheme do ask for information about adding further contributions to your pension.
6 If you are self-employed you should be paying at least 20% of your profits into a personal pension. Look on it as another necessary overhead, but one that will benefit you.  
7 If your husband or partner has one or more pension schemes make sure he has nominated you as his beneficiary in each case.  
8 If your husband or partner is going to purchase an annuity make sure that it is a joint life annuity with 100% to you if he pre-deceases you. Remember you are likely to outlive him.  
9 If you are getting divorced and your husband has a decent pension do use a solicitor to get your rightful share.  
10 If your husband uses a financial adviser please make sure you attend all meetings with him or her. If you don’t feel comfortable with your husband’s financial adviser then you should get your own, preferably an independent financial adviser.

Arthur Childs

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