Pension Planning for Women

03/11/2010 by Arthur Childs.

Yes, it’s true, there is a lot I don’t understand and I have to ask questions of others as shown in this photo of me at the recent New Model Adviser® Retreat 2010. Please bear this in mind when I write about women. I may have been blessed with a mum, two sisters, a wife, three daughters and two granddaughters but I find that with experience comes only confusion!

Women have now lost 6 years of pension benefits

Women are particularly affected by the changes to the state pension. Those changes have been quite dramatic when you consider that women were still able to retire at age 60 with a state pension until April this year but very shortly women will have had to wait a further six years for their state pension. We want to encourage all women to take a fresh look at their pension provision and to this end we have completely revised our Guide: Pensions for Women. You will find a copy on our website at www.arch-fp.co.uk/pension_planning_for_women.php.

The tax saving argument is compelling

Even if all of the other reasons we give in our Guide as to why women should pay more attention to pensions are ignored, there are extremely good tax reasons why it is imperative for married women, and others in a long term relationship, to make provision to receive their own pension income in retirement. 

Briefly, under separate taxation you will have your own personal allowance in retirement and income up to this level is totally tax-free to the family. The personal allowance (2010/2011 tax year) is £6,475 a year for anyone earning no more than £100,000 a year (£9,490 once age 65 is attained). In other words if you can produce a pension (including your State pension benefits) of up to £6,475 a year, in present day values, you will receive as a family every penny of that pension. On the other hand a husband or partner who already has a pension and who earns a further £6,475 a year in pension would currently pay tax on that increase in pension of £1,295 (ie 20% of £6,475).

Where your husband or partner is going to be a higher rate tax payer in retirement the argument for you to make your own pension planning is even greater. An additional £6,475 of pension paid to your husband or partner would result in £2,590 of tax being paid on that pension (ie 40% of £6,475). The tax savings potential increases once you reach age 65 because of the higher personal allowance or ‘age allowance’.

If you would like to review your pension planning please ask your usual Arch adviser, telephone 01483 204600 or email enquiries@arch-fp.co.uk.

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