Money Talks: I took a career break and now I'm worried about my pension 

What impact can taking some time away from employment have on your retirement fund and what can you do about it?

Women have to prepare more financially for their retirement than men, says Carol Brick

I am 45 and am a senior marketing executive in a multinational company. I was lucky enough to be able to take five years away from the workplace to care for my three children and have recently returned to my full-time role. Having reviewed my accumulated employee pension benefits, I am now very worried about the effect my absence has had on my retirement funding and am afraid that I will now have to keep working until age 65 when I had always planned to stop at 60. I have only ever contributed the minimum amount of 5% - Can you advise please?

It is a fact that women need to prepare more financially, for retirement than men for a number of reasons. Women can earn less even in the same roles as their male counterparts. For example in circumstances like your case, they may take career breaks to look after either young children or elderly relatives never mind the fact that they also live longer than men. So, women need to build a larger retirement fund from potentially fewer earnings and this can certainly present a challenge.

No need for major panic though, now that you have identified that there is shortfall, there is very tax-efficient way to address this. You state that you are contributing the minimum of 5% but as you are 45, you are actually entitled to contribute up to a maximum of 25% of your gross relevant earnings so you have the potential to top up your usual contribution with an ‘Additional Voluntary Contribution (AVC)’. If we presume that your salary is €60K per annum, you have the potential to increase your contribution from €250 per month to €1,250 per month and claim full tax relief at your marginal rate (40% tax back based on this salary).

The process to set this up is very simple, you just need to contact your pension provider, complete an application form and submit it to your payroll department. Your AVCs will then be deducted directly from your salary allowing you to claim your full tax relief at the source.

Also, ensure that you are aware of all aspects of your pension scheme and do not be afraid to ask the necessary questions. Ensure that you are aware of where your money is being invested and, with advice, make changes to your investment funds as necessary. If you do plan to retire at 60, you need to review your pension regularly in conjunction with your advisor to ensure that you are heading in the right direction funding-wise and that the expectant pension income will be enough.

A HerMoney survey revealed that 45% of women claimed to have old pension policies in place from previous employment but 52% of these had never reviewed their policies with no idea of how they were performing or how much their funds would be worth to them in retirement. If you are unsure of where you stand in terms of any other retirement benefits you have in place to date, talk to your advisor who will help you in this regard.

The main thing, for now, is to keep calm, take control, get professional advice and try and try your best to take advantage of the very generous tax advantages of increasing your pension funding as much as you possibly can to reach that ideal goal of clearing your desk and sailing into the sunset on your 60th birthday!