Warning for women who are £260 a year worse off than men in retirement – how to boost your state pension NOW
MILLIONS of women are £260 worse off a year in retirement compared to men.
Figures from the Department for Work and Pensions (DWP) has revealed women are getting £5 a week less than men.
The average weekly state pension income for women in November 2022 was £170.37 per week.
In comparison, men received £175.47 a week during that same period.
Under the old state pension system, the average weekly income would be £152.38 for women and £178.59 for men – an even bigger gap.
In addition, the data also revealed that around 1.8million people get less than £100 per week in state pension, and of those around 1.3million are women.
Approximately 12.6million people receive the state pension while just over three million of these receive the new state pension.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown: “The state gender pension gap continues to close with the difference between men and women’s average weekly incomes reduced to just over £5 per week.
“However, it is also important to say these are only averages and the data shows around 1.8m people get less than £100 per week in state pension.
“Many of these people will have other income sources to draw from but there will still be many who are really struggling.
“The vast majority of these are women and it is likely the lion’s share will have retired under the hugely complex basic state pension system.”
How can I boost my pension?
It isn’t all doom and gloom for women (and men) as there are ways you can boost your pension.
Check national insurance record
National Insurance is a tax all workers must pay once they earn a certain amount of money.
Contributions go into a government pot that pays for benefits like sick pay and the state pension.
That means you get some of the National Insurance contributions (NIC) you put in back.
A change in April last year saw millions of workers paying 1.25% more NI, but that hike was reversed from November 6, saving workers £330 a year on average.
You can check how much National Insurance you’ve paid using the government gateway portal.
You will need a login and password to do this.
If you do not have a login to the Government Gateway portal you can set one up, but will need your National Insurance number to do so.
You can check how much you have made in contributions during the current financial year, and check how many National Insurance credits you have received.
However, this portal will not give you an estimate of how much of the state pension you are entitled to.
You can also request a paper version over-viewing your contributions if you want.
Fill missing gaps if needed
If you find you do have missing NI years, then don’t worry – you can fill them.
You need a minimum of 10 and maximum of 35 years’ worth of NI Contributions (NICs) to get the full pension amount which is currently £185.15 per week.
Households were set to have until April 5 to backdate any missing payments in the last 17 years.
After this date, they would have only been able to backdate payments by up to six years.
But today, this deadline has been moved to July 31, 2023.
You can buy back missing years by contacting HMRC to get an 18-digit reference number.
You’ll then need to send the money to HMRC via bank transfer or by cheque.
It can cost anywhere from £800 to £8,400 to buy back years, depending on how many you’re after.
So make sure you check if it’s worth it first – a full NI year usually costs £824 and adds up to £275 each year to your pre-tax state pension.
If you get this maximum gain and it’s worth it as long as you live at least three years after getting your pension.
Claim NI credits now to avoid any future gaps
It is important to check if the gaps in your contributions can be plugged with free NICs credits.
Thousands are thought to be missing out on these NI Credits, leaving them worse off in retirement.
For example, those on certain benefits should qualify for Class 1 credits.
You can check the full list of who’s eligible for claiming credits on the government website.
It explains the circumstances where you’ll need to claim and when you’ll get it automatically.
This is the link to use: https://www.gov.uk/national-insurance-credits/eligibility.
Avoid child benefit trap
Parents are at risk of missing out on pension payments if they claim child benefit and earn over a certain amount.
When your income goes over the £50,000 threshold you lose some of it and if you earn over £60,000 you have to pay it all back – this is the high income child benefit charge.
Child benefit is worth £21.80 a week for your first child and £14.45 a week for any additional children.
For a family with three children that’s around £2,600 a year.
Laura Suter, head of personal finance at investment company AJ Bell, explained you can stop yourself from breaching the £50,000 income threshold by adding more to your workplace pension.
She said: “For the child benefit threshold the taxman considers your salary after pension contributions, which means that if you think you’re going to tip over the £50,000 mark you can put a bit more in your pension so that you don’t lose your entitlement to child benefit.
“For those who have just gone over the threshold it means that a potentially small contribution to your pension could save you a lot of money, particularly if you’re claiming child benefit for multiple children.”
That’s not the only perk either. The more you add to your workplace pension, the more your employer could match it.
Laura continued: “Another bonus is that many employers match pension contributions, so if you’ve not already exhausted that you’ll get an extra boost to your pension pot that’s effectively free money.
“On top of that, you’ll get tax relief, giving another bump to your pot.”
Pension credit if low income and already retired
If you’re on a low income and already retired then you might be entitled to pension credit.
The benefit is designed to help people over state pension age and on a low income with daily living costs.
You don’t need to be in receipt of the state pension to receive it.
Pension credit is described as a “gateway benefit” because even a small award can provide access to a wide range of other benefits.
This can include help with housing costs, council tax or heating bills – in addition to the extra cost of living payments.
The yearly help is typically worth more than £3,000 a year.
There are two parts to the benefit and pensioners can be eligible for one or both parts – here are the current rates for the tax year:
- Guarantee credit – tops up your weekly income to a guaranteed minimum level. This is £201.05 a week if you’re single and £306.85 a week for married couples.
- Savings credit – provides extra money if you’ve saved money towards retirement. You can get an extra £15.94 a week for a single person or £17.84 a week for a married couple.
To qualify, you’ll need to have a weekly income of less than £201.05 for single people or £306.85 for couples.
Your income is worked out taking into account various elements including:
- Your state pension
- Any other pensions you have saved, for instance, workplace or private pension savings
- Most social security benefits, for example, carer’s allowance
- Any savings or investments worth over £10,000
- Earnings from a job
The calculation does not include:
- Attendance allowance
- Christmas bonus
- Disability living allowance
- Personal independence payment
- Housing benefit
- Council tax reduction
If your income is too high to get pension credit, you may still get some savings pension credit, so it’s worth checking.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk