State Pension Women – State Pension for Women is greater part of retirement planning
Drawing the State Pension for women became significantly easier in April 2010, when the number of years of National Insurance contributions required for the full Basic State Pension was lowered from 39 to 30.
This means that all women who have paid 30 full years of National Insurance contributions will be entitled to the full Basic State Pension, which currently (June 2010) is set at £97.65 for a single woman and £156.15 for a couple.
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While the lower 30-year requirement applies also to men, the change was hailed as a good thing for women in particular. This is because women are more likely than men to have less full years of NI contributions under their belt, as they are more likely than men to have had a mid-life career break, working at home and bringing up children.
For a woman who has not paid the full 30 years of NI contributions, her Basic State Pension entitlement is calculated proportionally, according to the full number of complete years paid. In other words, deduct a thirtieth of the full Basic State Pension amount for each ‘missing’ year of NI contributions.
Womens pension age rising
At the same time, however, the womens pension age rises to 66 from April 2011. This means that, while more women will now qualify for the Basic State Pension, they must wait longer to get their womens’ pension.
This reflects the increasing longevity data for both sexes, which currently indicates that a woman is likely to live until she is 81, and a man is likely to live until he is 77.
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State Pension for women is central part of retirement planning
The state pension for women is more central to overall retirement planning than for men, for several reasons.
First, females are less likely than males to make adequate savings for their retirement, for instance by saving into a private womens pension. Figures* released in June 2010 showed that, of women over 50, just 38% were making adequate savings into a pension for women (‘adequate’ in this case defined as contributing a minimum of 12% of salary).
Second, because of the likelihood of a mid-life career break, as mentioned above, a private womens’ pension tends to be smaller than a man’s. In fact, women tend to bring nearly a third less than men to the table, when the time comes to turn their womens pension into a retirement income**.
The third reason why women are more dependent on the state pension is that, even when taken pound for pound, their private womens pension will generally yield a lower income in retirement than a man’s. This is because women are expected to live longer, and are therefore usually offered lower annuity rates for their womens’ pension by pension companies.
In 2010, for example, a man aged 62 with a pension pot of £100,000 would be offered an annuity giving him an annual retirement income of £6,703 or £558 per month. A woman aged 59, with the same pension pot of £100,000, would be offered an annual womens pension income of just £5,377, or £448 per month**.
Will your womens state pension provide enough for your retirement? Find out your options – get no obligation pension advice online or call 0800 678 5929
*source: Scottish Widows
** source: Aviva
