Published On: Sat, Oct 14th, 2023

Pensioners could be missing out on extra £62,200 in retirement as cash gap widens | Personal Finance | Finance

By increasing workplace pension contributions by one percent each month savers could potentially have an extra £62,200 by the time they reach retirement at 68.

Working women are finding it harder and harder to save for retirement as there are many obstacles to consider as the cost-of-living crisis continues.

Nearly two-thirds (65 percent) of women in their 20s and 30s with over £1,000 in assets say that providing financial support for a loved one presents a barrier to either investing in the first place or adding more money to their investments now, figures from Fidelity International’s ‘Women and Money’ campaign show.

Juggling different responsibilities can have a significant impact on women’s financial futures both now and in the future.

Emma-Lou Montgomery, associate director for personal investing at Fidelity International said: “The gender pay gap – sadly – has long been hanging over the heads of young working women. And, with more than one in ten women in their 20s and 30s finding the financial responsibility for others hampering efforts or appetite to invest, the situation calls for some much-needed attention.

“In the current high-cost climate, it’s important to recognise this attention shouldn’t add extra stress or financial concern.”

The data shows that if women aged 25 earning an average salary of £24,188 a year upped their workplace pension contributions by one percent each month – that’s just £20 a month – they could potentially have an extra £62,200 by the time they reach retirement at 68.

Fidelity International’s own data analysis from the power of small amounts tool shows this is for an investment of less than £5 per week.

Increasing contributions by two percent – the equivalent of £10 a week – could create the opportunity to add £124,500.

If that sum feels too much, even smaller amounts can make a big difference in the future, she stated.

Ms Mongomery continued: “It’s never too early to start putting a few extra pounds away, even if it feels a long way off, the more time you can give your money to grow, the better. It can also help to fill any gaps or breaks, you take through your life to, for instance, have children or look after loved ones.”

Not only are working women affected now, but they have also been affected in the past as responsibilities to look after children and take a break from work have meant a gap in National Insurance contributions.

Thousands of pensioners are waiting to receive back pay worth £6,550 after a series of state pension underpayment errors.

An estimated 170,000 elderly women have lost money over many years due to the DWP failing to make increases in their state pension.

Between £300million and £1.5billion may be missing from pensioners’ pockets due to errors in the recording of Home Responsibilities Protection (HRP).

Thousands will be receiving letters throughout autumn concerning HRP underpayments due to missing information on National Insurance records.

The scheme was supposed to protect the State Pension entitlements of parents and carers but was replaced by National Insurance credits in 20210.

HMRC will use National Insurance records to find as many people as possible who may have been entitled to HRP from 1978 to 2010 but have no trace of HRP on their National Insurance records.

Who may be due back payments for state pension?

There are six particular groups strongly encouraged to contact the pension service to see if they could be entitled to more state pension.

  1. Married women whose husband turned 65 before March 17, 2008, and who have never claimed an uplift to the 60 percent rate
  2. Widows whose pension was not increased when their husbands died
  3. Widows whose pension is now correct, but who think they may have been underpaid while their late husband was still alive, particularly if he reached the age of 65 after March 17, 2008
  4. Over-80s who are receiving a basic State Pension of less than £80.45
  5. Widowers and heirs of married women, where the woman has now died but was underpaid state pension during her lifetime
  6. Divorced women, particularly those who divorced after retirement, to check that they are benefiting from the contributions of their ex-husband

Anyone who thinks they must be affected can call the pension service on 0800 731 0469.

Those entitled could claim thousands back, which can help decrease the disparities between male and female pay in retirement.

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