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How the gender gap hits women’s retirement savings as well as pay

Posted on: 5th Apr 2018 by: CamOuse Financial Management Limited

A recent study has found women are generally less well prepared for retirement compared to men. The research, carried out by savings company Standard Life, reveals that whilst over half (55%) of men own a pension, this figure falls to just over a third (36%) in women. Even more alarmingly, more than seven in ten (71%) of women stated that they did not know how to start a pension.

The average amount of money saved by women into their pensions each month is around £124, when the recommended amount is at least double that, depending on age and other factors. The average woman in the UK wants approximately £532 per week to live on when she retires, but even factoring in the state pension, women are typically only saving around half of what they should to be able to achieve this.

Almost nine in ten (89%) of the 1,000 women over 18 surveyed said they would like help with planning for their retirement. Over three quarters (76%) of the respondents who don’t currently have a pension admitted to being worried about this.

“Female pension ownership is frighteningly low and for those that do save, the amount saved is nowhere near enough for a comfortable retirement,” said Aileen Power, Standard Life’s women’s pensions spokesperson. She added that many women “want to continue having their sun holidays abroad, city breaks, dinners out and have some fun when they retire” but that “the average woman will be hard pressed to run a car in retirement” based on the average amount currently being saved.

Whilst the focus of the research was on women’s savings and pensions, Power also highlighted the wider issue of people failing to save enough for when they finish working. “While men will be relatively better off in retirement, on average, neither men nor women are saving enough to maintain their current lifestyles in retirement. You don’t want to get to 68 and find you can’t afford to enjoy a glass of wine or a decent night out.”

Power also emphasised that the first thing to do if you haven’t been saving for your retirement is informal research: “Our advice would be to start off by talking about pensions to your friends and family, particularly those friends who are financially savvy. Google pensions, read websites etc. Find out how much your peers are saving and consider getting some financial advice.”

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CamOuse Financial Management is authorised and regulated by the Financial Conduct Authority.

None of the information contained in this website should be considered as personal recommendation and is for information only. Should you wish to make a financial transaction we recommend that you take personal financial advice after a thorough review of your personal and financial circumstances.

The information contained within the website is subject to the UK regulatory regime and is therefore primarily targets at customers in the UK.

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Understanding the true cost to your business

Pension arrangements must be available for all employees. There are three categories of employee:

Eligible

Aged between 22 and State Pension Age (SPA) with qualifying earnings over the Auto Enrolment earnings trigger

Non-eligible

Aged between 16 – 74 with qualifying earnings between lower threshold and the Auto Enrolment earnings trigger
 
Aged between 16 -21 or SPA – 74 with qualifying earnings over Auto Enrolment earnings threshold

Entitled

Aged between 16 -74 with earnings below the qualifying earnings lower threshold

Important Notes

  1. Eligible jobholders must be auto-enrolled
  2. Non-eligible jobholders are allowed to be auto-enrolled if they want to
  3. Entitled workers are entitled to join a pension scheme, but the employer doesn't have to contribute

Qualifying Earnings lower threshold

£5,772

Qualifying Earnings upper threshold

£41,865

Automatic Enrolment earnings trigger

£10,000

Minimum contribution level options:

8% of Qualifying Earnings of which

3% is employer's (starting at 1%)

9% of Basic Salary of which

4% is employer's (starting at 2%)

8% of Basic Salary of which

3% is employer's (starting at 1%)

(Where basic salary is at least 85% of total earnings)

7% of gross earnings of which

3% is employer's (starting at 1%)

Pay reference period

Essentially the frequency that the jobholder is paid e.g. monthly, weekly etc. but with reference to the tax month, week etc. therefore it may not be the same as the payroll period.

Deduction and payment of contributions

It is the employer who is responsible to calculate, deduct and pay all contributions to the AE scheme. NOTE – the first and last contributions are likely to be for less than a full pay reference period and should be adjusted accordingly.

Payroll services

It can be seen that it is very important that the payroll system synchronises with the AE scheme otherwise the employer will not be carrying out all requirements and then penalties will be incurred.

Staging date

Based on the employer’s payroll size as at 1 April 2012 and can be found at www.thepensionsregulator.gov.uk/employers using your PAYE reference. The Qualifying Workplace Pension Scheme must be registered with The Pensions Regulator within 4 months of the staging date.

Compliance and communication

Postponement

Auto-Enrolment can be postponed for up to 3 months:

  • For current eligible employees
  • For workers that meet the criteria in the future for the first time e.g. avoid joining temporary or lower paid workers

Opt-Outs

All eligible employees must be auto-enrolled, but can, with the correct notification, opt-out within one month of joining the scheme and be treated as never having joined. They can opt back in and will automatically be auto-enrolled every 3 years in any case!

Communication

There is a wide range of information that must be provided to all employees at certain times, such as:

  • The date auto-enrolment took place for eligible jobholders
  • That non-eligible jobholders have the statutory right to opt in
  • Entitled workers have the right to request the employer to enrol them into a pension scheme

Salary sacrifice

Contributions can be paid by effectively reducing salary, which saves on NI contributions, but employee must choose to do this – they cannot be forced, so a contractual variation will need to be implemented.

Default investment fund

Investment Options

All eligible employees will be automatically invested into a default investment fund, which is a balanced risk fund that is “life styled” to account for the employees approach to retirement. They also have the option to invest in a wide range of funds of their choosing.