MONEY COMMENT
Women Face Hardship In Old Age

By Cliff D'Arcy
August 13, 2003

Prior to joining the Fool, I worked for a specialist insurance company that was a subsidiary of a high street bank. One of my colleagues was a single mother with one child and, being a modestly paid secretary, had some problems making ends meet and dealing with her debts. Being of a Foolish bent even back then, I helped her to reorganise her finances and find a cheaper mortgage in order to cut her monthly outgoings.

However, what really shocked me was that she refused outright to join our employer's final-salary pension scheme, because it would involve contributing 5% of her gross salary (or just 3.9% after 22% tax relief). Every so often, I'd badger her to join the scheme, explaining that, thanks to tax relief and our employer's contributions, her 3.9% would lead to around 17% being invested on her behalf. In effect, by not joining, she was losing around 13% of her salary every year!

When I left the company, she still hadn't joined up and if she still hasn't done so, she'll have racked up around seven or eight pension-free years. Like many women, she suffered from 'White Knight Syndrome' and honestly believed that a man would rescue her, her son and her finances before it came to the crunch. Yeah, right!

Alas, the majority of women have problems with saving for retirement, thanks to lower wages, part-time working and maternity and career breaks. According to a recent survey conducted by Age Concern and gender equality campaigners the Fawcett Society, only 30% of women are confident they will have a decent pension, compared to almost half of men (46%).

Almost a quarter of women expect to rely on their partner to provide for them after retiring, with many young working women thinking this way. Most married male pensioners have an income three times greater that that of their wives, according to government figures. While over 9 out of 10 men (92%) qualify for the full State Retirement Pension, less than half of women (49%) get the full amount.

In fact, if it wasn't for the minimum income guarantee promised by the Pension Credit (to be introduced in October), many women clearly would be unable to afford to retire. So, what can women do to boost their income in retirement? Here are some ideas:

• If your employer offers a company scheme, join it, as this is almost always your best option (and better than arranging your own private pension plan).
• Get a pension forecast from The Pension Service, using form BR19 and create a pension CV to establish what pensionable service you have accrued in previous jobs.
• If you're not working because you're raising children or caring for relatives, make sure you claim Home Responsibilities Protection, which protects your basic state pension.
• If your earnings are below the lower earnings level for National Insurance Contributions (£77 a week for most workers), you won't be building up a state pension. Try increasing your hours or taking on a part-time job to boost your earnings and kick-start your pension entitlement.

Finally, if you don't like or trust pensions, don't just do nothing! Instead, consider a long-term investment via an ISA (Individual Savings Account), which could supplement your other income in retirement.

More: What Everybody Must Know About Pensions | The Pension Service | ISA Centre