A number of factors have left women with much lower pensions than men
Women in the UK have consistently been the 'poor relations' when it comes to pensions. Figures out today suggest that the gap between men and women's expected pensions has narrowed in the past year, but this is not good news for women, as it is simply a result of their pensions expectations falling by less than men's, but both are lower this year than last year.
The fact is that in terms of both state pensions and private pensions, women's prospects are worse. This is particularly the case for the older women, since our pension system has adjusted in more recent years to be fairer to women. So what are the problems women have faced?
State Pensions for women lower than for men
- When the state pension system was designed, women were generally not working and it was expected that they would rely on a husband for their pension. In fact, until 1977, married women were often paying 'Married Women's Stamp' which was a lower rate of national insurance that excluded them from the state pension system completely. They would have to rely on their husband's pension in retirement. This was changed in 1978 and women could no longer choose to pay this Married Women's Stamp, but those already paying it could continue to do so. Many women now in or reaching retirement are suddenly finding that they have no state pension entitlement at all as a result of being in this system.
- In past years, women who were not in the labour force - perhaps because they cared for others or were looking after children - were just left out of National Insurance. There are now better protections, with the Basic State Pension particularly having offered 'Home Responsibility Protection', but not all women qualified for this and it had to be claimed for full years, not part years, so again many of the older women lost out. Just as an example, 30% of women reaching pension age in 2010 received less than 60% of the full Basic State Pension, but only 2% of men had that low an entitlement.
- Part of the state pension system is earnings related, and women earned less than men, so they get less from this part of the state pension than men. In terms of the Additional State pension, the median entitlement for men is £28 a week, but for women it is just £12 a week.
- Women were also not credited in to the earnings-related part of the state pension fully while not working, so many women were left out of this part of the state pension even in years when they were accruing Basic State Pension.
- Women are more likely than men to have earnings below the minimum national insurance threshold. This means they will have no entitlement to a state pension for that year of work. Indeed, if women have two part-time jobs that both pay less than the national insurance threshold, even if their total earnings are above the minimum, they will still get no entitlement to state pension for that year.
All these factors have left women with much lower state pensions than men.
Women's private pensions also lower than for men for a number of reasons.
- They earn less than men and, as workplace pensions are all earnings-related, women will get less than men.
- Women work for less years than men, since their lives typically involve some years off for looking after children or other caring roles, whereas men's lives are different.
- In the past, private pensions also discriminated against women. For example, when many of today's sixty-something women were working and then got married, it was normal for their employer to force them to leave the company pension scheme!
- Private pension schemes were also allowed to exclude part-time workers in the past, so women again lost out far more than men.
All the above factors have meant women, in particular older women, have less private pensions than men. The differences will decrease in future, since reforms were introduced over time that helped to treat women more equally, but the gender earnings gaps and number of working years remain, so women's private pensions will still be lower than men's.
Radical reform of State Pension to be proposed in forthcoming White Paper: The coming reforms to state pensions that are expected to be announced in a White Paper this month, will propose a new system that will finally be fairer to women. I look forward to seeing it soon!