It’s estimated that two-in-three people will have to take time out of work to care for someone during their lifetime. This equates to an estimated £5,000 in pension savings for every year taken out of paid work. This time away from work during crucial earning years can have ramifications for the amount that women save into a pension over a working lifetime. In 2023 PensionBee’s annual study found that the gender pension gap stood at 38%. So what can you do to help close this gap and make sure your retirement savings don’t suffer?
How to top up your pension
1. Combine your old pensions
Track down old pensions from previous jobs to check how much you’ve got and find out what fees you’re paying. It might well be worth consolidating them into one plan so you can easily keep track and reduce the amount of fees you’re paying. If you think you have old pensions but don’t know how to find them, use the government’s free Pension Tracing Service.
2. Make the most of your annual allowance
If you have a personal pension or a workplace pension, you can make extra contributions to boost your retirement savings. There’s an annual limit to how much you can contribute; for 2024/25 the tax-free annual limit is 100% of your salary or £60,000 (whichever is lower). This includes both contributions paid by you and contributions paid by your employer. Just remember that, if you put more than this into your pension, you won’t receive tax relief on any amount over the contribution limit.
If you’d like to exceed the allowance in a given year you may be able to increase your tax-free contributions by using the ‘carry forward‘ rule. This enables you to carry forward any unused allowance from the previous three years. So if you haven’t used all of your recent allowances, you could use them to top up your pension in the current tax year. Find out more about carry forward and pension contribution limits.
3. Increase your contributions
If you’re enrolled in a workplace pension, you’ll typically be paying in 5% of your qualifying salary. Your employer will be paying a minimum of 3%. Ask your employer about contribution matching - if you increase your contributions (within the annual allowance), your employer might agree to pay more into your pension too. Each employer will be different but they’ll usually have a limit as to how much they’ll contribute. It’s worth asking your HR department for more information. If you aren’t working, there are other ways you can build a decent pension.
Some things to remember
- Make sure you’re enrolled into your workplace pension scheme;
- set up a self-employed pension if you work for yourself;
- consider increasing your personal and workplace contributions if you can;
- ask your employer about contribution matching;
- track down any old pensions from previous jobs;
- consider consolidating your pensions so all your retirement savings are in one place; and
- use ‘carry forward’ to make the most of any unused annual allowance if you’re able to.
Samantha Downes is a financial journalist and has written for most national newspapers and women’s magazines. She is also the author of two finance guides and has set up the Substack PumpkinPensions to help guide people looking to save more towards their future.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
