There are several reasons for workers to go part-time, including obtaining a better work–life balance and/or making time to care for dependents. However, what does it mean for your pension if you do go part-time? Do you still need a pension and how will being part-time affect your contributions?
It’s very easy to get caught up in the financial challenges of the present and forget to plan for the future. If you are one of the 8.5 million people who, according to the Office for National Statistics, currently work on a part-time basis, what does this mean for your financial future?
Do I need a pension? One day you will want to stop working, and when you do you will need a way to support yourself. The State Pension age in the UK depends on when you were born, but if you are currently in your 30s you won’t qualify for your state pension until you are 68 years old.
For the State Pension, the government also requires you to have 35 qualifying years of National Insurance (NI) contributions. The full new State Pension is £168.60 per week, but if you have taken a career break or have not earned enough to make NI contributions, you may not be eligible for the full pension amount. Therefore, it can be advisable to not rely solely on what you will receive from the state, and instead have your own pension savings.
But if you are a part-time worker, how do you start a pension?
Pensions for part-time workers As a part-time worker you are protected from being treated less favourably than equivalent full-time workers. Therefore, you should be offered the same pension opportunities, but some benefits may be applied pro rata (in proportion to hours worked).
One of the big changes to pension law in recent years was the introduction of automatic enrolment. Your employer must automatically enrol you in the workplace pension scheme, to which you will make contributions of 5% of your salary and your employer 3%. You have the option to opt out if you wish.
However, there are two catches for part-time workers with regards to auto-enrolment and workplace pension schemes.
Verdict Studies from the Pension Policy Institute (PPI), commissioned by NOW:Pensions, show that women’s average pension contributions still fall significantly behind those of men – £51,000 vs £157,000 – largely as a result of women taking on more part-time roles.
It is clear that part-time workers need more support when it comes to pensions, with suggestions being made to lower the £10,000 threshold for the auto-enrolment scheme.
In the meantime, if you are a part-time worker without a pension, talk to your employer about whether you can request to join its scheme, or maybe research setting up your own personal pension. How much you save in your pension is entirely up to you, but when it comes to paying for your retirement, every little helps.
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