This is a guest post by Natasha Rose, a finance writer who specialises in pensions, annuities and equity release.
Whilst you may sniff indignantly when your grandmother warns you to start saving now for your retirement as age creeps up on us all without warning and quicker than we think, deep down inside you know that your grandmother is right. The truth is that we are never too young to start thinking about what might now seem a like a million years away and start planning for a time when we are no longer able work.
Although women may be gaining greater equality within the workforce, in terms of increasing salaries so that they are more in-line with their male counterparts and gaining equal pension coverage, the need for retirement planning and saving among women has never been so imperative.
Take a look at the following modern woman’s guide to retirement.
Saving for retirement
Throughout our working years, we become accustomed to a certain lifestyle, which for many women, revolves around shopping, eating out and going for a drink with friends on a Friday night. With a disposable income to ‘play around with,’ the lifestyle which we now often take for granted is fairly easy to maintain.
Pensions are inevitably not so financially ‘lucrative’ as salaries and it is likely that the lifestyle you are enjoying now, in your twenties and thirties, you will still enjoy in your retirement years – minus perhaps the five-inch stilettos and five Tequila Slammers!
In order to have more money to enjoy our retirement and to be able to go shopping and have a drink – or perhaps afternoon tea – with friends and family, it is a wise precaution to start saving for your retirement now.
Changes in state pension
Earlier this year, the government announced plans to simplify to state pension by introducing a single-tier system. The widely anticipated changes to mean that everyone will be entitled to receive £144 a week so long as they have built up enough national insurance contributions. The second state pension that is currently in existence, which enables high earners to receive a second pension that is worth more than £150 on top of their state pension, will be effectively ruled out.
The government has said that the changes to the state pension will effectively mean that younger workers, by younger workers they mean those retiring in 2060, will be at least £2 worse off a week, due to the abolition of the second state pension.
Alongside the single-tier pension will be increases in the age people can qualify for the state pension. Between 2026 and 2028 the state pension age will increase to 67.
So what does all these statistics and politician jargon actually mean for the young women of today? The most significant point to remember here is that in order to qualify for the single-tier £144 a week pension, you will have had to have paid so many years national insurance contributions.
Part of the modern woman’s planning for their retirement should therefore include always paying national insurance contributions. Even during periods when you are out of work, you can still pay your national insurance ‘stamp,’ which as age is creeping up on all of us and policymakers are certainly not making life any easier for pensioners, would definitely be a good idea.
As the government warns by 2060 young workers will be £2 worse off, it is more imperative than ever that the earlier to start saving for our retirement, the better.