Historically, men have received more money annually from the State Pension than women. In a recent Which? survey it was shown that over 20 years, women would receive £29,000 less on average than men; however there are a few factors at play that mean the annual discrepancy may be largely offset. These include women receiving their state pension earlier than men at 60 and not 65. With the state pension age now being very close to equalised, how will this effect women going forward – will they continue to take a reduced annual benefit than men?

How the State Pension is calculated

To be eligible to receive any State Pension, you must have at least 10 years of National Insurance contributions on your record. How much you receive each week will depend on how many qualifying years you have in total, and to receive the Full State Pension, you will need a minimum of 35.

Qualifying years can be accrued in three ways:

• By paying National insurance through an employer or self-assessment
• By receiving National Insurance Credits, which are awarded by claiming some State Benefits
• By making voluntary payments

Where is the gender gap?

The main reasons for the gap in pension benefits are: women are more likely to work less hours, women have historically earned less than man, have taken time off work or leave employment altogether for periods of time during their lives to take care of children and or elderly and infirm relatives.

The new flat rate of state pension benefit that was introduced in April 2016 (currently £164.35 per week) is designed to rectify the previously mentioned issues that currently negatively affect women. In the past, a part of the state pension was based on earning and the more you earned the more you would receive from the state in retirement. This has been replaced and you are now awarded a flat credit for each year you earn more than £6,032 per annum no matter how much you actually earn in any one year.

Childcare and National Insurance credits

Parents who receive Child Benefit and are caring for a child under the age of 12 receive National Insurance credits automatically. If a parent is not entitled to Child Benefit they should still apply and ask for no payments as this will activate the automatic credit and count towards the state pension.

Grandparents and other family members aged over 16 but under state pension age that provide care for a child aged under 12 may also be able to get Specified Adult National Insurance credits. These are not credited automatically and need to be applied for (using form CF411A).

State pension credits for carers

If you receive Carer’s Allowance, you’ll automatically receive credits on your National Insurance record and therefore credit for your state pension.

Understanding your State Pension should be seen as part of the wider retirement planning process. So, to make sure that you have enough retirement income to achieve your goals, you can:

• Calculate how much you will get:

Using a State Pension forecast calculator, you can see how much you will have when you stop working and need to access your pension.

Knowing how much you will have if you don’t make any changes to your current situation will help you to identify any shortfall.

• Fill in any gaps in your record:

You can view your National Insurance record and make any voluntary contributions by clicking here.

• Evaluate your other pensions:

Knowing what you can expect to get in retirement income from your workplace or personal pensions will give you a better idea of the overall income you can expect to receive when you stop working.

• Seek financial advice:

Research has shown that those who engage with a financial adviser or planner could put an additional £98 toward their pension each month. This equates to an extra £3,654 in annual retirement income for later life.

Talking to a financial planner will also enable you to make better financial decisions and create a plan which will see you meeting your long-term retirement goals by making adjustments and changes in the short-term.

To get started, please feel free to contact us.