Today’s single women pensioners stand a 25% chance of living in poverty and unless the system changes the next generation are unlikely to fare much better. Nathalie Towner looks at why

Pay gap becomes pensions gap

It is women who come out the worse when it comes to pensions and there is growing concern that the next generation of women pensioners won’t be much better off.

The recent TUC conference recognised the seriousness of the issue with Pauline Thorne of UNISON aptly commenting that, “if you earn peanuts – you retire on peanuts”.

Women in a pensioner couple receive just a third of the income of their partner.

Ninety-one per cent of women do not receive a full basic state pension and two-thirds of women pensioners have no access to an occupational pension.

A joint campaign launched by Age Concern and the Fawcett Society highlights how the pay gap women suffer during their working lives becomes a vast pension gap in later life with almost a quarter of single female pensioners living in poverty.

“Today’s women pensioners are most likely to live in poverty and unless the government takes action it looks like history will repeat itself for the next generation,” said head of public affairs for Age Concern, Michelle Mitchell.

“Many women simply can’t afford to save and must rely heavily on the state pension. The current system is littered with obstacles and less than half of women pensioners qualify for a state pension in their own right.”

More women are in employment now compared to 30 years ago but because they are likely to be in low-paid jobs or working part-time their ability to work towards a full state pension or pay into any occupational or private pension scheme is strongly diminished.

Women are disadvantaged when it comes to pensions primarily because of their caring responsibilities. As the basic state pension is calculated on the number of years worked, women who have taken time out of the labour market are penalised. To be entitled to a full state pension women have to have made national insurance contributions for 39 years.

The home responsibilities protection (HRP) goes some way to compensating women for time spent out of the labour market as the scheme allows them to protect their basic state pension by applying for the number of qualifying years to be reduced.

However many remain excluded if they still fail to make up the minimum of 20 years of work or simply earn too little to meet the necessary criteria.

According to a DSS research report, as many as 22% of women aged 55-59 had already spent more than 25 years outside the labour market so would not receive a full pension even with full home responsibilities protection and an otherwise complete working record.

The new pensions credit to be introduced on the 6 October, replacing the minimum income guarantee, is another government scheme designed to raise the income of those with the least money in retirement. However, it has caused controversy because it relies on unpopular means-testing and is overly complicated.

This system also rewards those pensioners who have some savings over the basic state pension with an additional weekly sum to a maximum of £14.79 for single people or £19.20 if you have a partner. But as many women do not even qualify for the full basic state pension they will not be eligible.

The welfare system has let women down simply because it is not geared to their working patterns. Current initiatives do not do enough to redress the imbalances or recognise the different responsibilities women face throughout their lives.

Research carried out by Dr Jay Ginn for the Economic and Social Research Council shows how the different life circumstances of women affect their chances of retiring on a liveable pension.

She found that divorced women begin to 'catch up' on lost employment, earnings and pension-building only when their children are independent, but they remain at high risk of poverty in later life. Among women aged 20-39, divorced women's chance of having private pension coverage is less than half that of married women.

Her data also revealed that the biggest negative impact of motherhood on private pension prospects occurs for mid-skilled women, those educated to GCSE level. These comprise about one third of working age women and the proportion is rising.

The government did commission a green paper on pensions that recognised that the system is not working for women but it failed to recommend an action plan.

But action is needed as under the current system many women face a harsh retirement.

UNISON is instrumental in ensuring that the majority of work based schemes to which UNISON members have an option to join, are good occupational schemes, well worth considering.

“We believe that no-one should have a second-rate pension,” said UNISON senior pensions officer Glyn Jenkins.

“The low-paid should have access to a good final salary pension scheme. This is not the gold standard but simply the basic standard as anything less means you will be dependent on the state.”

One of the key issues is the sheer complexity of the pensions system and many women fail to maximise their income in retirement because they have not been well advised.

“Most women, even with uncertain work patterns, should seriously consider joining an occupational pension scheme, if it is available,” explains UNISON pensions officer Zohra Francis.

“We would encourage women to ensure they understand the different systems within the UK to ensure you can assess the options available to you on a regular basis.”

The bottom line is if we carry on as we are yet another generation of women will be spending their retirement struggling to make ends meet..

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