Business

Is it time to add a pension to your list of Christmas presents to yourself?

The Women Against State Pension Inequality organisation has been protesting at the change in state pension age for females from 60 to 65
The Women Against State Pension Inequality organisation has been protesting at the change in state pension age for females from 60 to 65 The Women Against State Pension Inequality organisation has been protesting at the change in state pension age for females from 60 to 65

ELECTION season is in full swing. Elections tend to shine a light on the most controversial issues of the moment, and this time one area of personal finance stands out.

The spotlight is falling directly on the plight of women, many of whom feel they are victims of discrimination due to changes in pension rules over the last two decades.

We have described in this column how the state pension fund is struggling to pay pensions to the rising numbers of older retirees. The Northern Ireland Statistics & Research Agency (NISRA) says that over the last decade, the population aged 85 and over has increased by 30 per cent, and grown at a rate five times higher than the population as a whole.

That’s why, throughout the UK, government decided in the 1995 Pensions Act that women could no longer expect an earlier retirement. The women’s state pension age of 60 would rise to equal the 65 for men, a process that was completed in 2018, and then gradually rise further to reach 66 next year, and 67 by 2028.

It’s not hard to see why women, particularly those born in the 1950s, are angry at this. They’ve done all the right things, paid their NI contributions all their lives, only to suddenly hear they’re not getting their state pension for an extra five years.

The highest-profile protestors about this are the ‘Waspi’s’ – Women Against State Pension Inequality - but they’ve had no success at getting a rethink. One group recently went to court claiming unlawful discrimination by the government. They lost.

Which brings us to this month’s election. With such a thorny issue, and one which many see as blatantly unfair, Labour have now declared that they would treat this issue as an ‘historic injustice’, and pay compensation to affected women. Their proposal would award £100 for every month of pension you missed out on, costing a whopping £58 billionn over five years for the four million women involved.

It’s an idea that will certainly be a vote winner – but Labour have to get elected before they can move it forward, and then they have to get it through Parliament. That’s a lot of ‘ifs’.

The state pension age is not the only challenge affecting your retirement planning, if you are a woman.

Suppose, for instance, you start a family, but want to continue working. You could be in for a shock. Recently, the Employers for Childcare 2019 report shocked us by showing the average full-time childcare place now costs £166 a week, making it the biggest weekly bill for many families after the mortgage or rent, outstripping even the weekly food bill.

No surprise that many working women don’t see the point in going on working, once they have a new baby, and opt to take up to 10 years out as ‘stay at home mums’.

If they had a workplace pension, they may end up missing out on years of saving, and all that ‘free money’ their company pays in as employer contributions.

One more point about the future of the state pension. At the risk of stating the obvious, retirement planning is a long-term business. It would be unwise to assume that the goalposts – which moved in such an unkind way for the Waspi’s – will not move again, during your working life.

In fact, many accept that the state pension, in its present form, is unsustainable. For women in particular, thinking about additional saving in a personal pension is now a crucial decision.

One financial expert put the situation well in the papers this week: “Building up private pension savings provides flexibility over when you finish work, and prevents your retirement plans being side-swiped by a future government intent on making ends meet.”

There are many things you can do today to protect yourself from any tinkering that may be done to the state pension in the future. Is it time to add a pension to your list of Christmas presents to yourself?

:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at “Kennedy Independent Financial Advice Ltd” or at www.mkennedyfinancial.com