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There are solutions to gender pensions gap, analysts say

Taking out a Lifetime ISA could help to maximise savings, according to Hargreaves Lansdown

Legal & General - There are solutions to gender pensions gap, analysts say

Taking out a Lifetime ISA could be an option to fill the gender pensions gap, according to analysts.

The pension of women aged over 50 is half the size of men’s, said last week Legal & General PLC (LON:LGEN).

READ: Women over 50 to retire with pension half the size of men’s, says Legal & General

It’s due to the gender pay gap and unpaid caring work, while the generation of people approaching retirement has not had time to benefit from auto-enrollment in work pension.

Meanwhile, just 30% of women are confident they’ll be able to afford to retire compared to 40% of men, according to Hargreaves Lansdown PLC (LON:HL.).

A Lifetime ISA could be a more tax-efficient and flexible option for many women, said the online wealth management platform, but only 19% of women are completely confident they know what a LISA is, compared to one in four men.

However, it could be a more tax-efficient and flexible option for women aged 18-39, it added.

LISAs can only be withdrawn to buy a first home or from age 60, though the cash can be accessed at other times with a charge of 25% of the amount withdrawn.

People can save up to £4,000 a year and the state adds a cash bonus of up to £1,000 annually on top. 

“Women are less likely than men to be higher or additional-rate taxpayers, which means once they have exhausted any employer pension contributions, a LISA is more tax-efficient than a pension. This is because while the tax relief is the same for a pension and LISA for a basic-rate taxpayer, a LISA offers tax-free income when you take money out,” analysts said.

The flexibility of a LISA can be appealing to women whose work is less secure than men’s, because they tend to have caring responsibilities at various stages in their life. So, if push came to shove, they could access the money in their LISA during really tough times,” they continued.

“The LISA isn’t always the best option, and if you’re employed, then the first chunk of pension savings should be into your workplace pension to take advantage of the maximum you employer is prepared to give you. However, it’s always worth considering. Because if women are going to breach the gender pensions gap, they should take advantage of all the help they can get.”

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