Check out this straightforward guide to pensions for women. Understand the lingo, get the facts and plan ahead.

Devoting time to talking about pensions, is the surest way to make most people’s eyes glaze over. But for women in particular it’s not something you can afford to leave to the future.

We are constantly being told that we can’t rely on the state when we retire. What we are not often told is that women never could. The whole basis of our pension system was men’s working lives, in which women were considered dependants, reliant on their husband’s income. What that has meant in practise is that women’s income in retirement is only 40 per cent of men’s. Scary, isn’t it?

For many of us the whole pensions system is so complicated we are put off thinking about it, let alone doing anything.

Basic State Pension
The Basic State Pension is based on the national insurance contributions you have made. Many women who took time off to care for children, or earned under the limit for national insurance contributions do not qualify for the full state pension. The Basic State Pension is linked to prices, and is now worth just over £65 a week.

SERPS
The State Earnings Related Pension Scheme is the Government’s second pensions scheme. Because it is earnings related, the amount you get out at the end depends on the amount you pay in. If you earn enough, pay employee’s National Insurance Contributions and haven’t opted out then you are automatically part of SERPS.

Occupational and Personal Pensions
Sixty per cent of women do not have any form of occupational or personal pension. Occupational pensions are provided by your employer. Both you and your employer may make contributions. Personal pensions are arranged by you with a bank, building society or other financial institution.

Income support and the Minimum Income Guarantee
The Government has introduced the Minimum Income Guarantee, the amount below which a pensioner’s income should not fall. This is achieved by topping up the basic state pension with income support. Income support is means tested, so is reduced to take into account any income or savings you have over a certain amount.

The times they are a-changin'

And the pension system is no exception. The following new schemes are being introduced.

State Second Pension
The State Second Pension is intended for those paying national insurance contributions but earning under £9,500 a year, and those out of the workplace because of caring responsibilities. Full-time carers, and those looking after a child under five full-time will be counted into the scheme as though they earned £9,500.

Stakeholder Pensions
This Pension is aimed at those earning over £9,500 and under £18,000 a year. Stakeholder pensions will be provided by private pension companies who will have to offer a pension that has low charges and is flexible. There will be incentives for people who have a State Second Pension to move to a Stakeholder Pension.

Contributions from unearned income
In the past you could only pay into a pension from your earnings. Under the new system you will be able to pay in from other income, for example if you are not working, or working part-time because of caring responsibilities, your partner could make payments into your pension for you.

Unfortunately these changes will not help women who move between caring and low paid work and who are never able to save enough to take them above income support level.

What to do and when

The following is intended as a general guide. To find out what is best for you contact an independent financial advisor. There are advisors who specialise in financial services for women.

In your 20s
Join your employer’s pension scheme if you can. Consider a personal pension if your company does not run a scheme. The earlier you start paying into a pension the better. If you have a personal pension, remember to increase payments as your salary increases.

In your 30s
Pay as much into your pension as you can afford. An employee can pay up to 15 per cent of pay and perks into a company scheme. If you are getting divorced make sure you know how much your partner has in investments savings and pensions before agreeing a settlement. Don’t rely on your partner’s pension. If you are taking time out to look after your children, remember to think about pensions; you can now continue payments into a personal pension even if you are not in paid work.

In your 40s
Try to top up your pension either through additional voluntary contributions or by putting as much as possible into a personal pension.

In your 50s
Start thinking about when you want to retire. You can start drawing on private pensions from 50, although you will usually get far better value if you hold off. Your pension provider, or an independent financial advisor should be able to give you an assessment of the income that could be derived from your private pension savings. You can find out about your state pension entitlements by filling in DSS form BR19.

60 and beyond
If you are a woman born before April 1959 you will start receiving state benefits at 60, but the state pension age for women is equal with men at 65 for those born after that date.