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    From Ros Altmann:economist and pensions,
    investment and retirement policy expert

  • pensionsandsavings.com

    Equal State Pension ages but no pension equality for women

    Equal State Pension ages but no pension equality for women

    • Men and women’s State Pension age will be equalised tomorrow 6 November 2018.
    • But equal State Pension age does not mean pension equalit.  

    Ten reasons women lose out in pensions as gender pensions gap remains wide.

    Tuesday November 6th is the day men and women’s pension ages are equalised:  After decades of difference, when women received their state pension at age 60, while men had to wait till age 65, tomorrow sees the historic date when women and men will both have a pension age of 65. Women’s pension age has been rising since 2010, under legislation passed in 1995, but new measures in 2011 accelerated the increases and the pension age for both men and women will keep rising to 66 by 2020.

    Equal pension ages but not pension equality: Women have always had lower pensions than men, leaving them at greater risk of later life poverty, especially as women tend to live longer than men. An increasing proportion of women are single and cannot rely on a partner’s pension for retirement income. Women in their 50s and older have lost out most, but younger women face penalties too, as all pensions – State, Workplace and Private pensions – discriminate against women. Some of the inequalities date back many decades, but others are new problems created by recent legislation. The Government needs to act urgently to fix these loopholes which cause problems for so many women.

    Here are ten top reasons why women lose out in pensions relative to men:

    1. Women’s state pension age increased by more than men’s at shorter notice
    2. State Pension triple lock does not cover Pension Credit so poorest women pensioners are not protected
    3. Very lowest earners (mostly women) are left out of National Insurance State Pension
    4. Women who don’t claim Child Benefit lose their State Pension entitlement
    5. Women have lower lifetime earnings and therefore lower workplace pensions
    6. Auto-enrolment excludes part-timers earning below £10,000 a year (mostly women)
    7. Low earners (mostly women) often pay 25% extra for their workplace pension
    8. Occupational pensions may not aggregate women’s pension service after maternity
    9. Many men buy single life annuities that don’t provide for their widow
    10. Women’s pensions are not properly protected on divorce

    State Pension penalties:  State Pension inequalities do not fit women’s lives. Even the new State Pension system and recent policy changes are introducing new unfairnesses that predominantly affect women, rather than men.

    1. Women’s state pension age increased by more than men’s at shorter notice: Government increased pension age for older women by up to 18 months with only 5 years’ notice, giving many of them insufficient time to prepare. Men had at least 7 years’ notice of 12 months rise. The short notice changes have caused significant hardship to many women, especially as many did not know about the original plans to increase their pension age from 60.

    Potential policy remedy: Government should consider making payments to women facing hardship. Many women relying entirely on State Pension for their retirement income and have not had time to build up private pensions. DWP could also consider allowing early access to State Pension if needed.

    1. State Pension triple lock discriminates against women: The much-vaunted State Pension ‘triple lock’, which is supposed to increase State Pensions by the best of price inflation, earnings inflation or 2.5%, leaves out the poorest and oldest pensioners, most of whom are women. More than half a million over 80s (of which nearly 450,000 were single women) receive Pension Credit – a means-tested benefit to lift pensioners out of poverty. This income for the poorest pensioners is only tied to earnings, while the new State Pension (which pays more than Pension Credit) is triple-locked.

    Potential policy remedy: Ensure the Pension Credit is protected the same way as State Pensions.

    1. Very lowest earners – usually women – are excluded from State Pension: Tens of thousands of working women do not receive any credit for their State Pension. Those earning below the £6032 Lower Earnings Threshold in one or more jobs, get no credit for State Pension at all. If they did not work, or earned more (between £6032 and £8424) the rules allow them to pay no National Insurance but still ‘earn’ a year of State Pension. The inflexibility of the National Insurance system excludes those who may have several jobs but each pays less than £6032. The Government has known about this anomaly for years, but not addressed it.

    Potential policy remedy: Government should reduce the Lower Earnings Threshold, or abolish it, and allow all workers with multiple jobs to claim credit for State Pension regardless of their earnings in each job.

    1. Women who don’t claim Child Benefit – even if they are not entitled to it – lose State Pension: Families where one partner earns more than £60,000 are not eligible for Child Benefit. But mothers must claim it, even if they know they are not entitled to it!. If they do not claim this benefit they know they can’t receive, they lose that year of State Pension. And they cannot backdate it if they discover this in future years.

    Potential policy remedy: Ensure all women looking after children can claim credit for State Pension and backdate any claims.

    Workplace Pensions discriminate against women:

    1. Occupational pensions for women suffer from lower earnings, interrupted careers and caring duties: As prime carers for both children and adult loved ones, women usually work fewer years, and also earn less than men. Lower lifetime earnings mean lower private pensions.  Women were often forced to leave company pensions if they married or worked part-time and tended to work in occupations where employer pensions were less prevalent.

    Potential policy remedy: Help women retain pension membership during maternity leave or childcare, encouraging employers or partners contributing for them.

    1. Auto-enrolment leaves out millions of women: Even the new auto-enrolment programme, which ensures all employers must provide workplace pensions, leaves out millions of women.  Anyone earning less than £10,000 a year (mostly women) is not 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 pension coverage.

    Potential policy solution: Remove the £10,000 earnings limit for auto-enrolment.

    1. Low earners (mostly women) often pay 25% extra for their workplace pension: Those earning between £10,000 and £11,850, who are auto-enrolled into their employer pension, are often being forced to pay 25% too much for their pension. This affects more women than men and is something most people seem unaware of. If the employer uses a particular type of pension scheme, that operates on what is called a ‘Net Pay’ basis, then instead of receiving the tax relief they would have in a different type of scheme, they have to pay extra to their pension provider. This is one of the largest injustices in pensions. Low earning women need most help to build up pensions, but are forced to pay so much more without knowing it.

    Potential policy solution: Ban pension providers and employers from putting workers into pension schemes if they will not receive the 25% bonus.

    1. Occupational pensions may not aggregate women’s pension service after maternity: Women in final-salary pension schemes, who take time off to have children and then come back to work, are often losing out relative to men who do not have interrupted careers. Some pension schemes refuse to merge periods of pension service, which results in these women receiving much lower pensions on retirement.

    Potential policy solution: Encourage pension trustees to allow women’s pension rights to be preserved during caring responsibilities.

    Private pensions penalise women too:

    1. Many men buy single life annuities that don’t provide for their widow: In Defined Contribution pensions, past rules encouraged men to buy only single life annuities, since they were told to ‘shop around for the best rate’. These annuities provide no cover for a spouse, leaving women with no private pension if widowed.

    Potential policy solution: Automatically enrol everyone looking to take money out of their pension or buy an annuity into free PensionWise guidance, so they understand the risks and complexities – ideally encourage more to take financial advice.

    1. Women’s pensions are not properly protected on divorce: Even though the law allows pensions to be shared on divorce, many women fail to factor this into their settlement, therefore losing out in retirement. But, even with agreed pension-sharing orders, new pension freedom rules can put divorced women’s pensions at risk. Pension trustees are not obliged to get consent from the partner to a pension-sharing order before transferring a final salary-type pension. Wives are, therefore at risk, if former husbands take the money out without informing her. Their former husband could also transfer money out of a Defined Contribution pension without their knowledge.

    Potential policy solution: Ensure that all women with pension sharing orders must give formal approval before former husbands can transfer or withdraw money from their pension.

    Gender pensions gap remains wide:  Although women have made enormous strides pushing through glass ceilings in the workplace, the gender pensions gap remains wide and new barriers have been introduced.  Urgent measures are needed to reduce women’s pension disadvantages.


    4 thoughts on “Equal State Pension ages but no pension equality for women

    1. An interesting article; I wonder if you have considered Armed Forces pensions in this? I served for twenty four years in the Army, twelve of those alongside women all of whom had exactly the same pension scheme as me and the same job opportunities. Indeed, due to equality issues, very often they had better job opportunities; but this is a different issue.
      My comment would be that most, if not all my female friends and relatives, and indeed my wife, were on higher wages throughout my army career, and whilst I have a very safe pension, it is fairly small and in no way could support me if I was widowed.
      I don’t disagree with your article, I just wanted to point out that it isn’t just women who have a rough time of things.

    2. I wonder if Ros could let us know what she thinks should be done about the life expectancy gap (men die earlier than women and therefore are less likely to reach state pension age and will spend less time in retirement). Does she think that men should retire two years earlier than women as a result. Is this not also part of the gender pension gap.

      She has mentioned the gender earnings gap over a working life. Could she also factor in the transfers between the genders through the tax and benefit system; and the “social wage” of various services such as the nhs (which are dispropotionately paid for by men). This may have a bearing on how large the gender income gap is in practice (particuarly for people earning average wages and leaving aside the very high earning outliers that pay most of the tax).

      Could she also say if she feels that the informal transfers from men to women have a bearing on how we should consider this issue. Many men support their partners during and after maternity leave for instance; even sometimes paying all the mortgage on jointly owned properties. Her analysis here does not seem to give any weigth to such informal transfers of wealth.

    3. And there is another injustice to single or divorced British women like me who have to live abroad (outside the EU) to care for aged parents – after a working life of 35 years (excluding university) and paying UK taxes, my state pension is locked in at its value on the day I first started taking it in 2004. It was 485 pounds sterling per month then and it is the same in 2018. That is grossly unfair. Maybe I should have done as my 97-year old mother said and had her come to live with me in the UK instead. The numbers of retired care-giving women, like me, living outside of the EU cannot be so great that the Chancellor cannot afford to be more just, but nothing like fairness will ever be entertained because the exchequer is always ferreting around trying to claw in every little unjust penny it can when it comes to pensions. And it is no surprise since it is women who probably draw down most on those coffers because we live longer. At least, when I return to live in the UK I will get a relatively large increase in monthly pension income. And the Chancellor will have the savings made by no longer paying full value pensions to all those sun-seeking post-Brexit ex-pats living in the southern EU, not that there will be so many of them any more.

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