Pensions for women

It is clear from a number of surveys that women are losing out big time in this vitally important area.

A great deal has changed since I first began dealing with clients as a financial adviser 50 years ago. However, one thing stubbornly seems to stay the same for many women that I have had the pleasure to advise over the decades and that is a certain disinterest in the topic of pensions. 


Why this should be seen as something more of interest to men I still have no idea. Perhaps in decades past when women generally stayed at home and men went out to work I can see the reasoning behind a certain antipathy to pensions but surely that has changed for most women today.

What is the problem?

The state pension age for men and women was equalised at 66 from 2018 onwards. The State Pension age for men and women will now increase to 67 between 2026 and 2028. The Act also provided for a regular review of the State Pension age, at least once every five years. Under the Pensions Act 2007 the State Pension age for men and women will increase from 67 to 68 between 2044 and 2046.

Women are particularly affected by the changes to the State pension.  Those changes have been quite dramatic when you consider that women were still able to retire at age 60 with a State pension until April 2010.

The problems are compounded, however, in that whilst women are generally acknowledged to be better financial planners than men, there does still seem to be a blind spot for many women when it comes to taking control of their own pension provision.

For women particularly, this time of life can be long lasting (on average women outlive men of the same age by around five years), enjoyable 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. 

This can be a very active time when you may continue in some form of part-time paid work, become involved in all sorts of organisations, or even start a business. 

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.

Single women

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. 

If you are relying on State pension benefits alone to provide adequate income in retirement you could be in for a great disappointment.  ABI research found that 63% of women who are currently retired are relying on State benefits alone. 

The Department for Work and Pensions (DWP) is trying to get women from 18 years of age onwards to think seriously about this subject.  At the other end of the scale if you have less than ten years to retirement and have made inadequate pension provision to date it is still worth doing something now.

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, ifyou 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 occupation 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 the 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 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 quite different.  The situation on death before retirement in this case is often that the fund value is returned to you.  If the plan has been in force for less than ten years the fund value is unlikely to provide much of a pension for you. 

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 we give in this guide as to why women should pay more attention to pensions 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, should 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 £12,570 (2022/23) 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 £12,570 a year, in present day values, you will receive as a family every penny of that pension.  The State pension is currently £185.15 a week or £ £9,627.80 a year and so you could produce at least another £2,942.20 of tax free income.

On the other hand a husband or partner who already has a pension and who earns a further £2,942.20 a year in pension income would currently pay tax on that increase in pension of £588.44 (ie 20% of £2,942.20).

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 planning is even greater.  An additional £2,942.20 of pension paid to your husband or partner would result in £1,176.88 of tax being paid on that pension (ie 40% of £2,942.20). 

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.

Naturally, the sooner you start to contribute to a pension fund the larger that fund has a chance of becoming.

Do you have to use a pension?

Whilst contributing to a personal pension plan has various tax benefits, there are other methods of saving for retirement that you could consider. 

You could, for example, invest each month in a Stocks and Shares ISA.  This produces a fund where capital growth does not attract income tax or capital gains tax.  Once you retire, and provided your fund is big enough, you could draw an income from the fund and you would not be required to declare this income to HM Revenue & Customs or pay any further tax on it.

You could use a Cash ISA which is a tax free form of deposit account but unless your planned retirement is less than five years away it is generally not advised to use deposit accounts for long term investing because of the effects of inflation.

Where your attitude to risk will allow, you might also like to invest a lump sum of £3,000 or more into a Venture Capital Trust (VCT).  These work very much like Stocks and Shares ISAs but the investment is in smaller unlisted companies and is therefore higher risk. 

There are definite advantages of using VCTs for pension planning, however, in that 30% tax relief is given at the outset (providing you are a tax payer) and substantial dividend income can build up over the years which is not taxed in your hands.  By investing the minimum amount into different VCTs from time to time a useful, tax efficient income can be built up for later life.

Annuity purchase

If you build up money in a pension plan the time will come when you want to take the benefits.  At present 25% of the fund can be taken as tax free cash and the remainder has to purchase an annuity, that is, a guaranteed income for the rest of your life.

If you have a decent size fund of, say, £80,000 or more you may not need to purchase an annuity but for the purposes of this guide we will assume that you have a much smaller fund.

Many people waste part of their guaranteed income for life at this stage by simply accepting the annuity being offered to them by the pension company with which they built up their pension fund.

There are two reasons for this:

  • They ignore the availability of the Open Market Option.  This simply means that they have the right to purchase their annuity on the open market and not just from the company they are currently with. 
  • Even if they do shop around they ignore the availability of an enhanced annuity.  It is estimated that around half of us have a health history or lifestyle which would mean an increase in our annuity payments of possibly 10% or more. 

Annuity design

Many people do not understand the wide range of designs that are available in annuities today. 

Some married men still purchase single life annuities because that gives the highest annual pension – you should talk your husband or partner out of that one!  In fact please do get involved in this most important decision.

Even when a husband or partner sets up a joint life and last survivor annuity (ie some level of income continues to be paid while at least one of you is alive) this is typically done on the basis that the annuity drops to 50% of its value if he dies first.  However, you can usually have the annuity set up so that there is only a 33% reduction on the death of the husband or even no reduction at all.

The message here is to take an interest in your husband or partner’s pension and to especially be involved when decisions are being made over the type of annuity to be purchased.

Pensions Checklist for women

  • 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.
  • If you will not receive a full state pension pay for as many missing years as you can afford, it will be worth it.
  • If you are employed do make sure that you join your workplace pension scheme.
  • If you are already a member of a workplace pension scheme do ask for information about adding further contributions to your pension.
  • If you are self-employed pay at least 20% of your profits into a personal pension and look on it as another necessary overhead.
  • If your husband or partner has one or more pensions make sure he has nominated you as his beneficiary in each case.
  • 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.
  • If you are getting divorced and your husband has a decent pension do use a solicitor to get your rightful share.
  • If your husband uses a financial adviser make sure you attend all meetings with him or her and if you don’t feel comfortable with your husband’s financial adviser then get your own, preferably an independent financial adviser.




This information does not constitute personal advice and should not be treated as a substitute for specific advice based on your circumstances.

Information given relating to tax legislation is based on my understanding of legislation and practice currently in force. Whilst I believe my interpretation of current law and practice to be correct in these areas, I cannot be responsible for the effects of any future legislation or any change in interpretation or treatment. In particular you are warned that levels of tax and tax reliefs are subject to alteration and, in any case, the value of such reliefs and benefits may depend on an individual’s circumstances.

If you are in any doubt as to whether any course of action is suitable for you, then you should discuss the matter with a suitably qualified independent financial adviser or other specialist.