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Pension Page

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.

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.

Millions of married couples have no idea about their spouse’s pensions & retirement plans

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Millions of married couples have no idea about their spouse’s pensions and retirement plans, according to new research

78% of non-retired married people do not know what their spouse’s pensions are worth.

47% of non-retired married people have not spoken to their spouse about their retirement plans

85% of non-retired married people are not aware of the tax-efficiencies of planning retirement together

Pensions & Retirement Still Remain a Taboo

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When it comes to marriage and money, it’s good to talk!

Millions of married couples have no idea about their spouse’s pensions and retirement plans, according to new research[1]. More than threequarters (78%) of non-retired married[2] people do not know what their spouse’s pensions are worth.

Nearly half (47%) of non-retired married people have not spoken to their spouse about their retirement plans and 85% of non-retired married people are not aware of the tax-efficiencies of planning retirement together.

Retirement finances

Wealthy people aren’t doing much better. Mass affluent people (those with assets of between £100,000 and £500,000 excluding property) are more likely than average to be aware of the value of their spouse’s pension, but the majority (60%) aren’t going to plan their retirement finances with their spouse and 78% aren’t aware of the benefits of planning retirement together.

The research indicates that millions of married people are not talking to their partners about their pensions and retirement plans. That’s a mistake because couples who jointly plan their retirement can be much better off when they stop working.

Lifetime of saving

Most people have a good idea of what their house is worth, and the same attitude should apply to their retirement funds. After a lifetime of saving, the value of a retirement fund can be worth as much as a property so it’s important that people know how much their retirement savings are worth and the potential death benefits they offer.

The best way for people to ensure they have the retirement they want, their pension income lasts throughout their retirement and that they avoid unnecessary tax bills is to obtain professional financial advice. This is especially true for people who plan to retire within the next five years.

Pension tips for couples

  • Pay into your partner’s pension: A higher-earning partner approaching the Lifetime Allowance or Annual Allowance could pay additional contributions into their partner’s pension. The contributions will attract tax relief.
  • Don’t forget the death benefits and Inheritance Tax benefits of pensions: Pensions won’t normally form part of the estate for Inheritance Tax purposes and, on death before age 75, they can usually be paid out tax free (on death after 75, they are taxed as the beneficiary’s income). It can make sense to discuss when and how to access a pension and if it would be better to spend any other savings first.
  • Avoid unnecessary large withdrawals from a pension fund: Couples should consider how much money they need to withdraw from their pension funds. Drawing too much too quickly can lead to large tax bills.
  • Make sure your partner knows who to contact about your pensions if you die: You may have carefully arranged all your finances so that they can be passed to your loved ones in the most tax-efficient way possible. However, if your partner hasn’t been part of the conversation they may make uninformed decisions. It’s worth remembering that any adviser/client relationship you have ends on death. Data protection rules mean your financial adviser won’t necessarily know what is happening. This can lead to irreversible and costly mistakes being made.

On retirement, many people’s first instinct is to request their full tax-free cash entitlement. However, unless a large lump sum is needed
for a specific purpose, this is not always the wisest course of action. If flexibly accessing a pension, it can often make sense for couples to retain most of the tax-free cash entitlement until a later date, looking to utilise the personal allowance (and potentially the basic rate tax band) to draw tax-efficient income instead.

Successfully managing finances in marriage

When you and your spouse married, you agreed to share a financial future. It’s an important issue for most married couples. Although successfully managing finances in marriage is essential to your happiness together, talking about money may not come naturally. To discuss how we could help you plan your finances, please contact us for more information.

Source data: [1] LV= surveyed 4,000+ nationally representative UK adults via an online omnibus conducted by Opinium in June 2021. [2] Includes couples in civil partnerships. UK population stats from ONS. Total UK adult population is 52.7m UK adults (aged 18+).

Pension Drawdown

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You can usually choose to take up to 25% of your pension pot as a tax-free lump sum when you move some or all your pension pot into drawdown, from the age of 55.

You will need to carefully consider where to invest the remaining 75% (or less if you have not needed to take the full 25%), taking your likely income needs and attitude to risk into careful consideration.

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