Your client can check their state pension forecast to find out how much state pension they are entitled to, when they can claim it, and how to increase it if they are not on track to receive the maximum amount - currently £179.60 a week.
If they have between 10 and 35 qualifying years, they will get a proportion of it - for example, with 20 qualifying years, it is around £102 a week. If your client’s forecast predicts that they will not have enough qualifying years, there are things you can do to help them:
- Make sure they are claiming child benefit. Even if they or their partner are fully tapered (i.e. earn over £60k), they will need to claim child benefit in order to get class 3 NI contributions and they count towards the state pension entitlement.
- Encourage them to make NI contributions even if they’re earning below the threshold – you do not have to pay NI if you are self-employed and earning under £6,515 a year but if you make voluntary contributions they will count towards your state pension entitlement.
- Advise that they look to cover any gaps - you can usually make voluntary contributions to cover gaps from the past six years. Class 3 contributions cost £15.40 a week (or £800.80 a year). If you lived for 20 years, you would get back around £5,000 in state pension.
- Look at the possibility of their partner contributing for them - if they are not working or are on a low income and their partner is building up more NI contributions than they need, they can transfer their credits to help your client maintain a complete record.
The right advice
Women are far less likely to seek financial advice than men; 37 per cent of women surveyed by Fidelity for its 2021 study said they did not feel wealthy enough to seek advice while 23 per cent said financial advice is “not for me”.
Married women and those living with a partner often leave finances to their other half to deal with and end up relying on their partner’s savings for their own retirement.
But if a mother has agreed to take the career breaks while the father earns the bigger income and they do not stay together, this can cause huge problems.
Three in five divorcees don’t even discuss pensions as part of their financial settlement, meaning that on average, a divorced woman leaves her marriage with just a quarter the retirement savings of her ex-partner.
So, when you are talking to men with partners, or couples together, try and encourage the women to take more of an active role if you can.
For clients who do take a career break while their partner is still earning, suggest that they talk to their partner about making contributions into their pension too.
This will mean they are continuing to build up their own pot - even when they are not working - making them less reliant on their partners’ savings in later life.
It is also key to remember that women’s financial journeys are different from men's. Often, financial advice directed at women makes certain assumptions – one of those being that they will have children, and another being that they will be the one who takes the career break.
And, while this might be right for many, it certainly won’t be right for all, so it is important to understand a women’s individual circumstances, and not to pigeon-hole them or rely on ‘general advice’.
Financial advice must be personal. It is about following your own goals, not a set path that someone else has designed for you. This is a key message that advisers can promote to their female clients and prospective clients.
