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Gender Pension Gap Industries

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The industries that have the largest gender pension gap

  • 59% Healthcare
  • 51% Construction
  • 48% Real estate/property development
  • 46% Pharmaceutical
  • 46% Aerospace, defence and government services
  • 45% Senior care

Women seeking financial support

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Financial Planner, Carol Lammy-Steele, discusses why women are less likely to seek financial support from a Financial Adviser.

Gender Pensions Gap

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Women’s pensions at retirement are half the size of men’s

The gender pensions gap is the difference in the average amount of money that men and women have saved for retirement and it begins at the very start of a woman’s career.

Women are more likely to take breaks from work to raise children or care for relatives, which can reduce their earnings and pension contributions over time. They also tend to live longer than men, meaning they need to have enough saved to last them through retirement.

As a result, women’s pensions at retirement are half the size of men’s, regardless of the sector they work in,
research has highlighted[1].

Long-term financial impact

The research found that every single industry in the UK has a gender pensions gap, even those dominated by female workers. Considering women are likely to live four years[2] longer than men, this issue deepens as they need to have saved around 5% to 7% more at retirement age.

Worryingly, more than a third (38%) of women who have taken a career break were not aware of the long-term financial impact it would have on their pension.

Three key industries

According to the research, the gender pensions gap exists regardless of average pay across different sectors, and ranges from a gap of 59% in the healthcare industry to 13% in courier services.

The healthcare (59%), construction (51%), real estate/property development (48%), pharmaceutical (46%), aerospace, defence and government services (46%) and senior care (45%) sectors were found to have the largest gender pensions gaps.

Of these six sectors, three are key industries for female employment – healthcare, pharmaceuticals and senior care[3]. There are many reasons for the gender pensions gap, ranging from women holding fewer senior positions and being paid less, resulting in lower pensions contributions, to the fact they are more likely to take career breaks due to caring responsibilities.

Gender confidence gap

Another potential driver is a significant gender confidence gap when it comes to managing pension pots. More than a quarter (28%) of women said they had confidence in their ability to make decisions about their pension, compared to almost half (48%) of men[5].

This lack of confidence extends further to other $nancial decisions, with women less likely than men to feel confident managing their investments (22% of women versus 41% of men) and their savings (56% of women versus 67% of men).

While many factors behind the gender pension gap are out of most people’s control, there are some actions you can take to help reduce it:

  • Contribute as much as you can to your pension – and start early.
  • Compound interest remains hugely underrated and poorly understood by both some men and women.
  • Check the charges on your historic pension pots. If appropriate, see if consolidating your pots will bring them down.
  • Check how much your State Pension will be and when you’ll get it. If it’s not going to support your ideal lifestyle, plan how you’ll cover any shortfall.
  • Put a bit more into your pension whenever you get a pay rise.
  • Talk through your pension planning with your partner. Make sure you know about each other’s saving plans, contribution limits and that you are both on the same page.
  • Keep a regular eye on your pension to make sure you’re in full control of it and saving for your ideal future.

There are a number of ways to close the gender pensions gap. Employers can offer flexible working arrangements that allow women to balance work and family life. Governments can also provide tax incentives for pension contributions. And finally, individuals can look to save
more for retirement.

Source data:
[1] The analysis is based on LGIM’s proprietary data on c.4.5 million defined contribution members as at 1 April 2022 but does not take into account any other pension provision the customers may have elsewhere.
[2] ONS: Life expectancy at birth in the UK: 82.9 years for women vs 79 years for men; Office for National Statistics, 2018–2020. Average four years.
[3] According to the ratio of female members across the Legal & General book of business.
[4] Legal & General Insight Lab survey of 2,135 workplace members was conducted between 4–26 July 2022.
[5] Opinium survey of 2,001 UK adults was conducted between 4–8 February 2022.

Pension Allowances frozen until 2026

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Pension Allowance

The maximum amount of contributions on which a member can claim tax relief in any tax year is the greater of:

  • the ‘basic amount’ – currently £3600 gross, and
  • the amount of the individual’s relevant UK earnings that are chargeable to income tax for the year.

Tax Planning in Retirement

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Managing Director and Chartered Financial Planner, Michael Cope, discusses tax planning in retirement.

Key Tax and Pension Changes from the Autumn Statement

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Last week Jeremy Hunt unveiled his Autumn Statement aimed at tackling inflation and stabilising UK finances. The Chancellor detailed issues such as tax, government spending and energy as part of his plan to navigate the impending recession.

Your Ellis Bates team are busy reviewing your situation given these changes and you will be discussing the implications and actions with your Financial Adviser in your next review.

If you are not currently a client with Ellis Bates and feel now is the time to discuss your tax allowance maximisation, your new CGT position and pension planning in light of these changes, please do not hesitate to book a chat as we are here to help.

Pension Changes

  • State pension triple lock has been retained meaning the state pension will rise by 10.1% in April 2023. Those on the new state pension will receive £203.85 per week (up from £185.15)
  • Pension Annual Allowance (100% of earnings or £40,000) and Pension Lifetime Allowance (£1,073,100) have both been frozen until April 2026.

Your Ellis Bates Financial Adviser will work with you to determine if you need to consider alternative ways to save towards your retirement in light of these changes at your next review.

Income Tax Changes

  • From 6th April 2023, the 45% Additional Rate of Income Tax threshold will be brought down to £125,140 (from its current rate of £150,000)
  • Income tax allowances will be frozen until April 2028 – Personal allowance will remain at £12,570 and the threshold for a higher rate of income tax (40%) will remain at £50,270

National Insurance thresholds will remain frozen until April 2028.

Inheritance Tax

The nil rate band will remain at £325,000, the residence nil-rate remains at £175,000, and the residence nil-rate band taper will still start at £2 million.

Capital Gains Tax Changes

In April 2023 Capital Gains Tax (CGT) annual exempt amount will be reduced from £12,300 to £6,000. It will be reduced further to £3,000 from April 2024

Your Ellis Bates team are busy reviewing your situation given these changes in CGT and will be in touch over the coming weeks.

There will be no change to the rate of Capital Gains Tax:

Tax Band Tax rate for Property Sale  Tax rate for other Asset
Basic Rate 18% 10%
Higher Rate 28% 20%

Stamp Duty

There will be no immediate change to Stamp Duty Land Tax (SDLT), the increases which were implemented on 23rd September 2022 (SDLT nil-rate threshold was increased from £125,000 to £250,000. The nil-rate threshold paid by first-time buyers was increased from £300,000 to £425,000) will remain until March 2025, after which the allowances will revert to their previous levels.

Are you a business owner?

If you are a business owner, a number of changes and support systems were announced:

  • Business Rates multipliers will be frozen in 2023-24 at 49.9p (small business multiplier) and 51.2p (standard multiplier)
  • A Transitional Relief scheme will be implemented to support and help up to 700,000 properties adapt to their new bills from April 2023
  • The Retail, Hospitality and Leisure relief scheme is being extended and increased from 50% to 75% for 2023-24, offering up to £110,000 per business
  • Supporting Small Business From 1st April 2023, the Supporting Small Business (SSB) scheme will cap bill increases at £50 per month (£600 per year) for the next 3 years. This will affect an estimated 80,000 properties.
  • Improvement Relief will now be introduced from April 2024 (originally intended for 2023)
  • Dividend Allowance will be reduced from £2,000 to £1,000 and reduced further, to £500, in April 2024.
  • Entrepreneurs Relief (Business Asset Disposal Relief) remains at 10% CGT if you sell all or part of your business (or its assets) on the profits you’ve made, up to £10m in total.

If you would otherwise pay higher rate CGT (20 per cent), this means you can save up to £1m in your lifetime through entrepreneurs’ relief.

If you are a business owner and an Ellis Bates client, your dedicated Financial Adviser will discuss these changes and how they may affect you and the actions needed in your next annual review meeting.

Stay updated: we update our Financial Advice hub with the latest financial news and insights, so hit the link to stay informed and up to date

If you do not currently receive financial advice from Ellis Bates, please Book a Chat to discuss this raft of tax changes and how we can help.

Sources: https://www.which.co.uk/news/article/capital-gains-and-dividends-tax-changes-in-the-2022-autumn-statement-ac6kT0e7yZ4X
https://www.gov.uk/government/publications/autumn-statement-2022-documents/autumn-statement-2022-html#:~:text=The%20Autumn%20Statement%20sets%20out%20a%20package%20of%20targeted%20support,bill%20increases%20following%20the%20revaluation.

Green Pensions

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Choosing to go green on our pension investments could have a far greater impact on the environment than we may have thought.

The positive news is that almost three quarters (74%) of pension schemes already have net zero plans in place, or will do within the next two years and pension schemes are making progress towards net zero commitments.

With new Taskforce on Climate related Financial Disclosures (TCFD) requirements coming into force, the number of schemes making such commitments is expected to grow further still.

Environmental Impact of SRI Portfolios

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This video looks at the Sustainable Development Goals that fall within the environmental category. This is concerned with the conservation of the natural world, as well as a companies energy usage, wastage levels and pollution.

How Green is your Pension?

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Time to consider a healthier approach to retirement?

Pension schemes have a critical role to play in the transition to a net zero economy, with many schemes already assessing the impact of their investments in the context of the goals of the Paris Agreement.

Striving to improve investment practices, and robust transparency standards across the investment chain, are an essential part of ensuring schemes can act as responsible stewards on behalf of millions of UK pensions savers.

Net Zero Commitments

Choosing to go green on our pension investments could have a far greater impact on the environment than we may have thought. The positive news is that almost three quarters (74%) of pension schemes already have net zero plans in place, or will do within the next two years and pension schemes are making progress towards net zero commitments.

With new Taskforce on Climate related Financial Disclosures (TCFD) requirements coming into force, the number of schemes making such commitments is expected to grow further still.

Identifying suitable performance

The news comes as climate change and Environmental, Social and Governance (ESG) stewardship continue to rise in importance and have become a central part of pension schemes’ investment strategy, with identifying suitable performance measures and devising frameworks to report on them also rising in importance.

Two-thirds (63%) of pension schemes have started working on their TCFD report, with over half (55%) saying they are within the scope of the reporting deadline and so plan to publish one this year.

Climate transition plans

More than a quarter (28%) have gone a stage further and said that they have already published their TCFD report, despite it not being a mandatory requirement. In terms of stewardship, two-thirds (68%) see their key priority as investors as being climate transition plans. Over half (56%) see these being net zero targets, while around a third (37%) see board diversity and human rights (35%) as key priorities.

Major risk to portfolios

In terms of non-climate related ESG factors, diversity and inclusion (51%) and human rights (49%) are seen to be the most important. There are a number of reasons for this increase, including regulatory pressure and public concern about climate change. However, the most important factor is likely to be financial: more and more investors are recognising that climate change presents a major risk to their portfolios.

Reviewing investment strategies

As a result of this increase in awareness, many pension schemes are now reviewing their investment strategies. Some are divesting from fossil fuel companies, while others are investing in green infrastructure and renewable energy. The survey shows that pension schemes are taking climate change seriously. This is a positive development, as it means that more and more people will have a retirement income that is not put at risk by the threat of climate change.

 So how Green is your pension?

Although we might like to think that our pension contributions are simply locked away for us to use once we retire, the reality is that this money is being invested. Greening your pension might be the single most effective action you can take to reduce your carbon footprint.

For more information or to discuss your retirement plans, please do contact us.

COP27 Goals & Vision

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COP27 Goals and Vision

Mitigation

We must unite to limit global warming to well below 2c and work hard to keep the 1.5c target alive.

Adaption

We must ensure that COP27 makes the crucially needed progress and urge all parties to demonstrate the necessary political will if we are to capture and assess our progress towards enhancing resilience and assist the most vulnerable communities.

Finance

In COP27 it is essential that we make significant progress on the crucial issue of climate finance while moving forward on all finance related items on the agenda.

Collaboration

The advancement of partnership and collaboration will help deliver our four goals and ensure the world is adopting more a resilient, and sustainable economic model where humans are at the center of climate talks.

Source: https://cop27.eg/#/vision

Socially Responsible Investing with Ellis Bates

For more information on our SRI portfolios, visit our Socially Responsible Investing page at https://www.ellisbates.com/socially-responsible-investing/.