PENSIONSANDSAVINGS.COM

6 March 2017

• International Women’s Day celebrates women’s progress but more to do
• Too many women still losing out in pensions relative to men
• National Insurance still penalises women – including in State Pensions
• Lower lifetime earnings leave women with lower private pensions too – older women particularly at risk

Older women have achieved improved equality, pay and maternity rights for today’s younger women:  As we celebrate International Women’s Day on March 8th, spare a thought for current cohorts of women coming up to or just reaching retirement.  Throughout their lives, they have paved the way for younger women, as they fought for maternity rights and equal pay, as well as battling gender discrimination in other areas of the workplace.  Female employment conditions are vastly better nowadays than when the babyboomer women were starting out.

But women still losing out in both State and Private pensions:  There remains a significant – albeit narrowing – gender pay gap especially for older women, and one area where all women still lose out relative to men – and always have done – is in pensions.  Women are still very much the poor relations when it comes to pensions. Both for state pensions and private pensions, women’s prospects are worse than men’s.

Mums are supposed to get credit for State Pension when looking after young children:  Mothers who stay at home to look after their young children are supposed to be eligible for credit towards their State Pension, so they do not lose out while bringing up their family.

But new unfairness in National Insurance denies State Pension rights to many women:  In fact, brand new unfairness has recently been introduced into our National Insurance system that will penalise many younger women.  The recent decision to deny Child Benefit to families where one partner earns more than £60,000 has a little-known side-effect of stripping many middle class women of their State Pension entitlements.

Mothers have to claim Child Benefit even though they know they’re not entitled to it: The credit for State Pension is only automatically added to their National Insurance record when they claim Child Benefit.  Those mothers who know they are not eligible for Child Benefit because their family income is above the limit are actually supposed to apply for the benefit anyway, in order to get homecare credit for their State Pension.

If they don’t claim the Child Benefit they’re not entitled to, they can’t backdate it:  Firstly, it seems ludicrous to expect women to apply for a benefit they know they are not entitled to.  But more importantly, if these women discover that they have lost their State Pension credit, they cannot claim it later.  The new rules mean women can only backdate a claim for three months, otherwise that pension year is lost for ever.  If they have not claimed within the three month window and find out about this later, the Government does not allow them the credit.

Classic example of State Pension penalising women and not recognising their lives:  Clearly, the State Pension system is not designed with women in mind.  Women’s lives are different, due to their social and family roles and our pension system must make proper allowance for this.  It’s no use saying they will be credited and then preventing them from receiving the credits with new, complex rules.

Further injustice for low earning women who also get no National Insurance credit for State Pension and Government refuses to help:  There are other ways in which women lose out on their State Pension too.  The National Insurance rules penalise low earners and those with several low paid jobs.  These are predominantly women.  Mothers who stay at home to care for children can get credit to National Insurance.  Those who work part-time and earn more than £5824 a year but less than £8060 are also credited with a year on their National Insurance record, but do not actually have to pay National Insurance.  However, if they earn less than £5824 a year in one or more jobs, they get no credit for National Insurance at all.  The Government has known about this anomaly for years, and has refused to address it.  I tried, as Pensions Minister, to persuade the Treasury to at least allow these women to claim National Insurance credits, or to reduce the minimum earnings level to ensure that those women who are working are not treated worse than those who stay at home.  So far, Ministers have refused.  This is unacceptable.

More women are single nowadays so can’t rely on partner’s State Pension:  As increasing numbers of retired women are single or divorced, they have no husband’s pension to rely on and need their own pension.  So receiving less State Pension is of great concern, particularly as they also have much lower private pensions too.

Lower earnings, interrupted careers, caring duties mean less private pension:  As women are the prime carers for both children and adult loved ones, women’s lower lifetime earnings mean their private pensions are lower.  They are often left out of workplace pensions and have less income to devote to saving.

Auto-enrolment leaves out millions of women:  Even in the new auto-enrolment programme, far more women are left out of workplace pensions than men.  Anyone earning less than £10,000 a year (mostly women) does not have to be automatically enrolled into a pension and will not get the benefit of their employer contribution.  If they are in more than one job, but each pays below £10,000 they miss out altogether on the behavioural nudges that have been so successful in widening private pension coverage recently.  Low earners can request to be enrolled, but of course that is far less likely due to the very inertia that auto-enrolment is designed to overcome.

Older women faced short-notice changes in State Pension age that caused hardship:  Overall, the inequalities paint a bleak picture for women’s retirement income.  The Government also increased the state pension age for older women, giving many of them insufficient time to prepare.

Women continue to struggle to match men financially:  Between balancing their careers, looking after children and caring for elderly parents women are being squeezed from every angle.  Those in their 50s and 60s have particular difficulties, but younger women face penalties too.

Social care crisis disproportionately affects women:  The crisis in social care hits women hardest.  It is wives, daughters and sisters who usually bear the brunt of caring responsibilities, sacrificing their own income for the sake of their loved ones.  This leaves women less prepared to fund their own care needs and women are much more likely to live longer than men and be on their own, so will spend more money on care in later life than men.

Great strides have been made, but big divides remain:  Life in Britain today still leaves women worse off than men, particularly as they get older.  Although women have made enormous strides pushing through glass ceilings in the workplace, the gender pay gap remains and there is still a significant gender divide in pensions and care.  More progress is needed to reduce women’s disadvantages in 21^st Century UK society.