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Pensions

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.

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.

Pensions and Divorce

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  • The average age of divorce is now 47 for a man and 44 for a woman
  • One in seven (15%) didn’t realise their pension could be impacted by getting divorced
  • A third (34%) made no claim on their former partner’s pension when they divorced
  • One in twelve (8%) divorcees don’t have their own pension and were relying on their partner to finance their retirement
  • One in five (19%) divorcees will be significantly financially worse off in retirement because of a divorce

Source: https://www.aviva.com/newsroom/news-releases/2022/05/thousands-risk-pension-poverty-after-divorce/

Financial Advice: Enhancing People’s Lives

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Financial Adviser, Carol Lammy-Steele explains how she helped to enhance a client’s life by providing help and support to someone going through a divorce.

Dealing with Divorce

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Revolution in family law finally removes the need for blame as a basis for divorce

No one enters into marriage expecting it to end in divorce. However, for many couples, divorce is the sad reality. If you are facing divorce, it is important to know that you are not alone. Each year, thousands of people go through the divorce process.

While divorce can be a difficult and emotionally charged time, there are things you can do to make the process go more smoothly when important decisions need to be made. Keeping a level head to negotiate a fair financial settlement is vital.

No-fault divorce removing the need for blame

From 6 April 2022 no-fault divorce came into effect in England and Wales. This is a long-awaited revolution to family law, finally removing the need for blame as a basis for divorce. Now the only ground for divorce is that the marriage has ‘irretrievably broken down’.

This means the law no longer requires blame to be apportioned, neither is there any requirement to !it your particular circumstances into one of the five facts that you previously had to prove, i.e. there is no need to cite behaviour or adultery nor wait for the minimum two-year separation period.

More amicable resolutions for parties

In addition, further crucial changes are that the respondent to the divorce is now unable to contest the divorce (the limited grounds to challenge a divorce relate to jurisdictional grounds or validity of marriage).

If you and the other party both agree the marriage has broken down irretrievably, then a joint application for divorce can now be made.

If you find yourself in this situation, here are 5 points to consider

1. Seek professional advice immediately

Seek legal and separate financial advice immediately. Your professional Financial Adviser can help you draw up a list of joint and personal assets and valuations, so any legal advice you seek is based on accurate information. This can make an appointment with your solicitor more time and cost effective.

You’ll need to draw up a list of assets e.g. first or second homes, pension pots, investments, value of any businesses etc., checking when they were purchased and finding out if they should fall into the category of marital assets. In addition, list all your outgoings both joint and individual.

2. Cancel all shared finances

Cancel any financial commitments that might be in a joint name immediately. The more unscrupulous partner could take advantage otherwise and saddle you with debt you are liable for. So cancel credit cards, joint accounts, personal loans and even overdrafts if possible and set up afresh in your own name.

3. Timing is everything

Although it may be the last thing on your mind, choosing the right time of year to divorce could significantly impact on the financial outcome for each individual. When a marriage or registered civil partnership breaks down, it is likely that tax will not be at the top of the agenda.

Your tax position refers to the amount of Income Tax and Capital Gains Tax you’ll need to pay. During the divorce process, there is a window of time where a spousal exemption applies and then drops off.

4. Splitting pensions

When it comes to pensions, finding a way to achieve a clean break so you are not tethered to your partner forever is key. What can be divided depends on where in the UK you are divorcing. In England, Wales and Northern Ireland the total value of the pensions you have each built up is taken into account, excluding the basic State Pension.

In Scotland, only the value of the pensions you have both built up during your marriage or registered civil partnership is considered. Normally, anything built up before you married or after your ‘date of separation’ does not count. There are two main ways of dealing with pensions at divorce that apply across the UK.

1. Pension sharing is often the favoured way of dividing a retirement fund because it achieves a ‘clean break’. This involves couples splitting one or more pensions. The aim is to ensure that the future incomes of both spouses are equalised. Your professional Financial Adviser will be able to help you implement any pension sharing order after the splitting process is complete.

2. The second option, pension offsetting, sees pension rights balanced against other assets, such as the home. Typically, if one spouse has a pension fund worth £500,000 and the couple jointly own a property worth £500,000, one may keep the property and the other keep the pension – though things are rarely that simple, so professional advice is key.

5. Budget for your future

Whatever happens, your life is going to be very different once the divorce is complete so it’s important to budget for the future life you want to live. Obtaining a copy of your credit report is a good start, so you know what your standing is, especially as many people will need to think about a new mortgage after divorce. A credit report will also highlight any joint lending you might be liable for.

Financial planning for divorce – what do you need to know?

Obtaining professional financial advice can be invaluable in guiding you through the myriad financial decisions from valuing and splitting pensions, financial disclosure and income planning, to valuing investments, managing tax and implementing court decisions to get your finances back on a sound footing. To discuss your options, please contact us.

Gender Confidence Gap

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There is a significant gender confidence gap when it comes to managing pension pots

The following table shows the large difference in women and men being confident in pensions, investments and savings:

Confidence in: Women Men
Ability to make decisions about their pension 28% 48%
Managing their investments 22% 41%
Managing their savings 56% 67%

Source: Opinium survey of 2,001 UK adults was conducted between 4-8 February 2022.

Bridging the Gender Pensions Gap

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Women left with half the pension pot, no matter the job.

We’ve all heard about the gender pay gap, but very few discuss the gender pensions gap, despite the fact so many women experience it. Women’s pensions at retirement are half the size of men’s, regardless of the sector they work in, new research has highlighted[1].

The gender pension gap is the percentage difference in income between men’s and women’s pensions and it begins at the very start of a woman’s career.

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].

Lower Pensions Contributions

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.

Of those that have taken a career break, 38% did not know the financial impact it had on their pension contributions[4].

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 financial 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.

Need advice to close the gender pay gap in your pension?

Women often have disrupted work patterns, career gaps and work part-time – this can impact their ability to save consistently for retirement without savings gaps. If you are concerned about your retirement plans and would like to review your pension options, please contact us . We look forward to hearing from you.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

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.