Auto enrolment and the impact on women

03 April 2018

From 6th April, the government will make changes to the current auto enrolment system which will increase the level on contributions employees need to make. While they currently contribute 1% of their salary (matched by their employer), the total contributions will soon rise to 5% - only 2% of which needs to be added by an employer. This means many workers could see their contributions treble.

While this will obviously affect many workers, Andy James – head of retirement planning at Tilney – looks specifically at how this could impact the female workforce.

“Auto-enrolment has certainly brought more individuals into pension funding and a fair percentage of these will be women. Current contributions are very low but are set to increase over the next two tax years so this will hopefully boost working women’s retirement funding as long as they remain opted in.

“The major issue around pension funding for women remains the fact that they tend, more than men, to have breaks in employment for family care. This will naturally reduce their own ability to contribute but also mean that they miss out on employer contributions over the time period they are away from work. Continuing to save into pensions is possible up to the maximum annual amount of £2,808 net of tax relief (which is still available) but not having any income often leads to affordability issues.

“Women who are self-employed are in the same boat as men and are left to their own devices as far as retirement planning goes. This often comes low down on the priority list when running your own business so can be left far too long before anything is put in place. Government promises to help in the area of self-employed and retirement have yet to materialise and therefore currently many are left in the dark around the importance of putting something away for the future.

“As an overall percentage of retirement income the state pension is higher for women owing to less other retirement savings. It is therefore vital that they ensure that they remain eligible for national insurance credits wherever possible even when not working. This can be achieved by claiming child benefit and will help boost the total state pension when it is paid. Those that have other halves who earn in excess of £50,000 and are impacted by the higher Income Benefit Charge often do not claim the benefit. However you can choose not to get Child Benefit payments, but you should still fill in the Child Benefit claim form. This will help you get national insurance credits without the issue of tax charges.

“Overall there is a lack of awareness around all retirement issues and more so for women. It is disappointing that the government does not give more information on these matters and assist in making important nudges in the right direction. This lack of awareness will lead to real issues for many in the current working population as they near retirement age. A poor retiree is bad news for the individual and bad news for the UK economy!”

About Tilney

Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years.  Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.

We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.

Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.