 Home Pensions Women & Pensions The problem
The problem
The issue of women’s poverty in retirement is now much higher on the political agenda, but what are the problems women face in getting fairer, decent pensions?
The current State pension system designed by Beveridge in the 1940s, treating married couples as one unit. Married women were expected to depend upon their husband’s entitlement to benefits and pensions. Entitlement to benefits was based on a full working life for men of 49 years.
The fact that over two million women are in receipt of the means tested State Pension Credit (two-thirds of all women pensioners) is a clear indication of the scale of the problem of women’s poverty in retirement.
Family patterns are changing with far more couples now choosing not to marry and it is estimated that by 2020 there will be as many divorced women between 60 and 65 as widows.
Working patterns are changing, with very few people staying in the same job all their life. The broken working patterns long associated with women, are now more common for men.
Women pensioners receive only 57% of the income of male pensioners. Only 16% of recently retired women are entitled to a full basic State pension in their own right.
Why are Women’s pension incomes lower?
Women undertake unpaid parenting and caring throughout their lives.
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Of mothers of under-fives, 52% are in employment, and two-thirds of those work part-time.
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A quarter of all women aged between 45 and 64 are carers.
Women’s pay is less than men’s.
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The gap between men and women’s pay has narrowed but the average woman’s full-time hourly rate is still 18% less than a man’s.
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The part-time pay gap is much worse: part-time pay is 22% less than hourly pay.
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Overall part-time women earn 40% less than full-time men, about the same as 40 years ago.
The State system does not cope with women’s working patterns.
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There are 2.2 million women not earning a basic State pension.
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Home Responsibilities Protection (HRP) for parents and carers gives only limited recognition to women’s caring responsibilities, and many slip through the net.
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HRP is for complete tax years only so if your caring responsibilities are for only part of a year it doesn’t qualify you.
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Only people caring for a person for more than 35 hours per week qualify.
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Those with less than 25% of the credits needed for a full State pension, get no pension at all.
Private pensions (company and personal) do not deliver for women
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In total only 38% of working age women are paying into a private pension, compared with 46% of men.
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50% of women who are saving for retirement, stop when they have a child.
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Only an estimated 15% of unskilled part-time women are in a pension scheme.
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Pension scheme coverage is lower in the private sectors where there is a high concentration of women.
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Private pensions are salary related, so low pay equals low pensions.
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Because women live longer, annuity rates for women are lower for them than for men, so even if a woman has the same size pension pot as a man, she will get a smaller pension in a defined contribution scheme.
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Final salary schemes favour those with unbroken service – mainly men.
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