This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).
A fierce battle has been going on in the Court of Appeals in 2020. Many women born in the 1950s have been fighting for compensation after seeing their state pension age gradually rise from 60 to 65 over the past ten years. The case has recently concluded with a ruling that the state pension rise does not discriminate against WASPI women (Women Against State Pension Inequality), and so the Court has upheld the law. Given this decision, what options might now be available for women in their 50s who are looking to develop their retirement plan?
Research suggests that there could be 1.2m women in their 50s in the UK who have built up no pension savings whatsoever. Fortunately, those in this position still have an opportunity to build up their retirement fund. First of all, a 50-year-old woman could potentially build up 17 qualifying years’ worth of national insurance contributions (NICs) to receive a strong state pension entitlement by the time they reach state pension age (which will be 67 between 2026 and 2028).
It may also be possible to build up “incomplete” previous years by making voluntary NICs. This could “plug the gaps” up to seven years prior, thus potentially allowing a 50-year-old woman to build up a total of 24 qualifying years of NICs. Some of these missing years may not require very large sums to “complete” – although others may need this. Speak to your financial planner if you are considering this option as a means of building up your state pension entitlement.
Outside of the state pension, however, it will also be crucial to consider other retirement income sources. Bear in mind that the full new state pension in 2020-21 provides £9,110.20 per year (i.e. with a NI record of 35 qualifying years), which most people will be unable to live on by itself. As such, it’s a good idea to consider how to leverage your workplace pension (and possibly your private pensions) to maximum effect over the coming 10+ years.
Maximising pensions tax relief
Under the current rules in 2020-21, workers can contribute a maximum of £40,000 per year into their pension(s). If you’re a basic rate taxpayer, you get 20% tax relief on these contributions – which means it only “costs” you 80p to put £1 into your pension. This has the potential to boost your pension pot quite significantly since the money that should have gone to the government in tax instead goes into your retirement fund. Higher rate taxpayers are currently in an even stronger position. Not only are you likely more able to set higher sums aside each month for your retirement, you also receive 40% tax relief on your contributions.
Beyond these ideas, there are other options for women in their 50s who are looking to improve their lifestyle prospects in retirement. If you are a homeowner, for instance, then it might be wise to consider the options of downsizing or equity release as other ways of releasing funds for your retirement income – although we’d stress exploring other options first before resorting to these. Finding ways to reduce your expenses can also be very worthwhile. In 2020, for instance, the base rate is at an historic low (0.10%) which could open up the chance to find a better deal on your mortgage – perhaps by moving from a standard variable rate to fixed rate. This could open up extra income each month which could then be put aside towards your retirement.
Conclusion & invitation
Are you a resident in Oxford looking to improve your retirement plan? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469