HELPING YOU PLAN A BETTER RETIREMENT

HELPING YOU PLAN A BETTER RETIREMENT

HELPING YOU PLAN A BETTER RETIREMENT The small but steady progress in the number of women saving enough for later life in recent years shows that, to some extent, the gender gap in later life savings is narrowing. Auto-enrolment has also brought more savers into the fold, with the number of women not saving at all at a record low. The wider picture, however, reveals a worrying trend emerging among younger generations. Women in their 20s are far less likely than men of the same age to be saving enough or anything at all for later life. Fear of financial hardship which women are more likely to experience is discouraging women from saving into pensions, leaving the most financially vulnerable at an even greater disadvantage.* * Women & Retirement Report 2018 Alongside this, the Female Financial Capability Imperative identifies a critical need to address gender financial stereotyping, and to support girls and young women to improve their relationship with money and risk, to secure their economic empowerment and financial independence.** ** Insuring Women s Futures Report 2018 AREAS TO CONSIDER WHEN YOU RE PLANNING FOR THE FUTURE Taking maternity leave, reduced working hours, childcare costs and potentially looking after an elderly relative have attributed to an overall gender pensions gap for women. You can find the latest Women and Retirement report and a range of Pension Basics films on our website to see how you compare and help you take your next steps in retirement planning. Read our report > Pension Basics >

PARENTAL LEAVE DIVORCE/ SEPARATION NEW TO THE WORKPLACE

PARENTAL LEAVE Every employer has different parental leave policies in place, but there are a number of factors you should be aware of before you embark on maternity or paternity leave. INCREASING PENSION CONTRIBUTIONS STATUTORY MATERNITY PAY EMPLOYER PENSION CONTRIBUTIONS PENSIONS FALL IN LINE WITH SALARY If you take time off to have a baby, or an extended career break, you should consider the long-term benefits of keeping up, or even increasing, your pension contributions. Paying a little extra before you take time off could mitigate any shortfall. Six in ten women aged 22-29 are not saving enough for retirement and a quarter aren t putting anything away for later life.* While maternity leave is up to 52 weeks, it s important to remember that statutory maternity pay is only for 39 weeks. Depending on your employer s policy, this may well mean that you receive no pay at all for the last 12 weeks of your maternity leave, if you take the full 52 weeks off. Employer contributions to your workplace pension may stop after 52 weeks. If you plan to take an extended career break, you might want to consider increasing your own contributions to cover any shortfall. Your company s contributions to your pension may fall in line with your salary if you return to work part-time. If you have a specific figure in mind for your desired income in retirement, you may need to account for the longer-term impact of working part-time in the short term by increasing your contributions. *Women & Retirement Report 2018

PARENTAL LEAVE Maternity, parental or paternity leave can reduce your pension contributions during your time off. It s worth discussing with your employer how you can plan for the long term financial obligations that come with starting a family. SHARED FINANCES/PARTNER CONTRIBUTIONS If you have a partner, you could benefit from discussing your choices around pension savings with them. You should also consider your options for sharing the impact of reduced contributions. If you re not working, your partner can contribute to your pension. This might be something you want to consider. BASIC RATE TAX RELIEF If you continue paying into your pension while on parental leave, even if you re not earning, the Government could contribute at least an extra 20% on top of your own contributions through tax relief. If your partner did contribute to your pension, their payments would be treated as being paid net of income tax, and the Government would pay basic rate tax relief on them.

PARENTAL LEAVE Claiming Child Benefit while on parental leave can protect your National Insurance record and help minimise the impact of your leave on your State Pension entitlements. CHILD BENEFIT You should consider registering for Child Benefit as not registering could affect your State Pension. Even if there is no short-term benefit, the long-term benefits can make it worthwhile. Families will spend 70,000 on childcare and babysitting costs alone as their children grow up, impacting the overall amount they have available to save for their future.* *Insuring Women s Futures Report 2018 NATIONAL INSURANCE To get a full State Pension, you need 35 years of National Insurance contributions or credits. If you take time out over the course of your career, you should consider how to make up the shortfall towards achieving your full 35 years of contributions. Even if you re not working, when looking after children, you ll receive National Insurance credits if you claim Child Benefit until your youngest child is 12.

WHAT DIVORCE OR SEPARATION COULD MEAN FOR YOUR FUTURE DIVORCE It s important that to get a good understanding of your pensions entitlements and the impact of any settlement that you make upon your pension benefits. Without a good understanding of how your divorce or dissolution affects your pension, you may find that your pension s benefits may be significantly different than what you expect when you come to retire. More than half of married people (56%) would fight for a fair share of any jointly owned property. Yet less than 1 in 10 (9%) claim they want a fair share of pensions. If going through a divorce, it s important that you understand the legalities around what happens to pension pots during divorce proceedings* *Scottish Widows Retirement Report 2017 SEPARATION One in three marriages break up after 15 years**, making divorce and separation a key risk for women who have lower earnings and financial assets than their partners. If you decide to separate, delay or not proceed with a formal divorce or dissolution proceedings, your pension arrangements remain unchanged. Following a separation, you might want to think about making changes to things like your nomination of wishes forms (i.e. who you ask the pension provider to provide any pension benefits to in the event of your death). If you move out, you will also need to change your address details. **Insuring Women s Future Report 2018

WHAT DIVORCE OR SEPARATION COULD MEAN FOR YOUR FUTURE COHABITING There is a heightened risk for women when cohabiting relationships end due to the lack of legal separation rights. For cohabiting couples, individuals are potentially legally in a worse position. Unlike divorce or dissolving a civil partnership, there is no formal legal process to go through. This means when the relationship ends, some women have little to no financial security for their future, including access to property and pension assets. It is important to understand your property rights if you co-habit as if the property is in your partner s name, you do not automatically have a right to remain there. PENSION OFFSETTING Pension offsetting is one of the options available on divorce or the dissolution of a civil partnership and can provide a clean break between all parties. All of your assets and those of your ex-spouse or partner are taken into account. With pension offsetting, each party retains their pension assets, but these are offset against the other assets. So, if one person has a large pension pot, the other may receive the house, if it is of similar value.

WELCOME TO THE WORKPLACE AUTOMATIC ENROLMENT Automatic enrolment is a Government initiative to help more people save for later life through a pension scheme at work. In the past, many workers missed out on valuable pension benefits, because their employer didn t offer them a pension, or they didn t apply to join their company s pension scheme. Automatic enrolment changes this. It makes it compulsory for employers to automatically enrol their eligible workers into a pension scheme. The employer must also pay money into the scheme, ensuring more people can save for the kind of retirement they want. Eligible employees will be automatically enrolled into their workplace pension scheme. The employer must make pension contributions to the pension scheme and the worker may also have to contribute. Employees who do not want to join the scheme may opt out for a three-year period. However employers are required to automatically enrol them after this three-year period has ended, unless the person decides to opt out again.

WELCOME TO THE WORKPLACE SALARY SACRIFICE Salary sacrifice is an especially tax-efficient way for you to make pension contributions and your employer may offer this option as part of their scheme. If so, you can give up part of your salary (your sacrifice), which your employer then pays into your pension, along with their contribution to the scheme. As you re effectively earning a lower salary, both you and your employer pay lower National Insurance Contributions (NICs). Better still, your employer may pay part or all of their NIC saving to your pension too, although they don t have to do this. There can be some disadvantages though, depending on your individual circumstances, so you should always ensure you have all the information when deciding if salary sacrifice is right for you. Your employer should give you an overview of how salary sacrifice might affect you. You can also ask your employer to carry out a calculation to show how salary sacrifice would affect your take home pay to help you make your decision. 4 in 10 women in their 20 s (40%) who have a pension don t save as much into it as they would like.* *Women & Retirement Report 2018

CHANGES TO THE WORKPLACE WORKING REDUCED HOURS Working part-time doesn t mean that you should be treated any differently than someone doing the same job full-time. This means that you have the same rights to join your employer s workplace pension scheme or to be automatically enrolled, provided that you are eligible for this. As your earnings are likely to be lower than someone working full-time, your pension benefits are also likely to be lower. But it s still important to consider your future finances. REDUNDANCY If you re made redundant, your immediate concern will probably be finding a new job and you may receive a redundancy payment to help you cope financially until you do. After redundancy, you can decide to keep your pension benefits where they are and even continue to contribute to the workplace scheme. Or, you can transfer what you ve saved to a new pension scheme. You can choose to use part of your redundancy payment to contribute to your pension. Or, if your employer agrees, you could give up some of your redundancy payment as an employer contribution to your pension. This is known as a redundancy sacrifice. If you decide to make additional payments into your pension, just be careful that you don t exceed the annual allowance, as payments above this are subject to tax. CHANGING EMPLOYER If you leave your pension scheme when you change jobs, the benefits you ve built up still belong to you. You normally have the option to leave them where they are or transfer them to another pension scheme. You don t have to decide straight away, you can generally transfer at any time up to a year before you are expected to start drawing retirement benefits.

SUMMARY PENSION BASICS IN 30 SECONDS You might face a number of different challenges in planning for retirement. Especially if you have different working patterns, priorities and attitudes toward saving, which can all play a role in the discrepancy between male and female retirement planning. This guide will hopefully have given you some useful insight into the key issues so you can feel confident in your retirement planning. Our Pension Basics films are filled with useful information to help you plan for retirement. Ranging from What is a pension? to How much money should I be saving for retirement each month?. We aim to provide you with the information you need to take your first steps towards a plan for your future. VISIT OUR WEBSITE Pension Basics > Our website has a range of reports, articles and useful information to help you plan for your future and discuss pensions and related topics with your employer. Visit our website >

Scottish Widows Limited. Registered in England and Wales No. 3196171. Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 181655. 27175 11/18