Seniors Network - Fawcett Society

Retired men receive an average income of £202 a week, retired women get only £161 (Department for Work and Pensions, Pensions & Incomes Series July 2001)
More than twice as many older women as men are reliant on income support (Department for Work and Pensions, Income Support Quarterly Statistics Inquiry August 2001)
As many as 22% of women aged 55-59 had already spent more than 25 years outside the labour market and would not reach a full pension even with full Home Responsibilities

Protection and an otherwise complete working record. (DSS Research report 114, Building up Pension Rights)

A third of women carers spend over 20 hours a week in unwaged caring work. (Social Focus on Women and Men ONS 1998) This caring work has been valued at £39.1 billion a year (BMA report Taking Care of the Carers 1995)
In 1996/97 in Great Britain the average independent income received by women in retired couples was around 40% of men’s (Department of Social Security)

why are women pensioners poor?
Women are more likely to take on caring responsibilities and therefore have time out of the labour market which affects their entitlement to the Basic State Pension (which is calculated according to the number of years worked).
Women are also more likely than men to be low paid and to work part-time which also affects their access to occupational pension schemes and their ability to pay into any pension scheme.
Women have suffered because the welfare system has been geared to men’s patterns of lifetime earnings, to full-time employment with no or only very brief periods out of employment.
The Welfare system assumed that women would be able to rely on their husband’s pensions to support them in their old age. Women were able to choose a lower rate of National Insurance Contributions (married women’s contributions) as it was assumed that they would not need to build up entitlement to benefits in their own rights. However the legacy of policies like this is that older women living alone, either through divorce or widowhood, make up the poorest pensioners1.

The current pension system

Basic State Pension: The BSP is a contributory benefit and is not means tested. It is payable

to all those who have made the necessary National Insurance Contributions. To be entitled to

a full state pension you have to have made National Insurance Contributions for 39 years (44

if you are a man).

The BSP used to be linked to earnings, but as a result of changes in 1984 and 1995 under the Conservative Government, the BSP became linked to prices instead.

91% of those without a full Basic State Pension are women (Government figures given in a written answer in the House of Lords 21 July 1997). The numbers of women entitled to the full BSP is increasing, because more women are working and continue to work even after having children. Also the introduction of Home Responsibilities Protection has helped to protect entitlement to the BSP (see below)

Home Responsibilities Protection (HRP)

HRP aims to protect entitlement to the BSP for women or men, who are unable to work due to caring responsibilities. HRP allows for up to 19 years out of the labour market due to caring to be calculated as if you had been making National Insurance Contributions. So if you made contributions for the other 20 years – you would be entitled to a full State Pension.

Pensioners currently over 80 would not have received the benefits of Home Responsibilities Protection because it is only available for complete tax years from April 1978 - too late to value the caring responsibilities many of these women would have undertaken their whole lives.

SERPS

State Earnings Related Pension Scheme was introduced in 1978 . Employees would contribute to SERPS unless they were contracted out and have an occupational or personal pension instead.

Recently SERPS hit the news because of legislation passed in 1986 which would halve the amount of SERPS a widow/widower would inherit if their spouse died on or after 6th April 2000. Although the legislative change was made in 1986, there was very little publicity about this for a long time afterwards. DSS leaflets were not updated for nearly ten years and many people believed they were misled by the Benefits Agency. This cut would have particularly penalised older women who stayed at home to care for children and who will be reliant on their husband’s pension to provide for them in their

retirement..

In November 2000, following on from calls for fairer proposals from various NGOs, including Fawcett, the Government announced that the changes would only affect those who are more than 10 years away from their state pension age. For those within 10 years of pension the changes would be phased in for those closer to retirement.

State Second Pension (S2P)

The S2P will replace SERPS as the State Second tier pension. It is aimed at low income earners (under £9 500) a year and has a number of features which will benefit women. For example it is aimed at low-income earners, most of whom are women. In addition the S2P allows them to be ‘credited’ into the scheme if certain conditions are fulfilled (such as caring for a child under 5 or caring for someone who is disabled for more than 35 hours a week2).

However Fawcett still has concerns that women will not see the full benefit of these changes as the regulations compartmentalises women’s lives in an unrealistic way and may be unable to deal with the fact that women move between full time and paid work, and managing different caring responsibilities across their lifetimes.

Stakeholder Pensions

Aimed at low to middle income earners specifically those who earn over £9000 a year, they were introduced in April 2001. They are not state provided but available from commercial financial services

companies like banks or building societies, but have to meet a number of government standards aimed at ensuring that they offer value for money and flexibility. The increased flexibility and low charges will benefit women in particular, however there are still concerns as to whether these will provide adequately for women. In particular women will find it difficult to assess whether they will best be served by the S2P or whether to move into a stakeholder pension as their earnings tend to fluctuate far more over the course of their lifetimes than men’s earnings.

Minimum Income Guarantee

The MIG is a means tested benefit aimed at ensuring that pensioners not entitled to a full BSP receive a minimum income. The Government recently announced a welcome increase in the level of the MIG, but despite a massive government campaign to promote take up of the MIG, it is still clear that many of those who are eligible to claim are not claiming3. This may be in part due to the complexity of the claims process, but also the stigma associated with claiming means tested benefits.

Pensions Credit

A new credit which the Government plans to introduce to encourage individuals to save for their old age by rewarding those who earn money or have savings over and above their BSP

How can we make the pension system work for women?

Changes in policies should help pensioners living in poverty now, and build a system which

will work for the next generation of women pensioners.

The key to future pension reform is to use the more variable patterns of employment which women experience as the premise of any new system. This will benefit both men and women, as the changing nature of work means that men too face periods of unemployment, job insecurity and short term contracts which no longer fit traditional patterns of employment and earnings.

Recent reforms have tried to take on board these differences but still compartmentalise women’s lives in a way that is unrealistic. Women’s lives tend to be flexible; moving between full-time and part-time work, as well as managing differing caring responsibilities, for children as well as parents or older relatives.

It is also vital that the unpaid caring work women undertake needs to be valued as an important social contribution. Carers should not have to forfeit financial security in old age as a result of the worthwhile work they undertake. The idea of crediting in parents who care for their children and carers into pension schemes should be developed further and more flexibly to allow for the multiple responsibilities which women juggle and ensure they are adequately provided for in their old age.

Other sources of information

Age Concern

Astral House

1268 London Road

SW16 4ER

Tel: 020 8765 7200

Help The Aged

207-221 Pentonville Road

London

N1 9UZ

Tel: 020 7278 1114

National Pensioners Convention

National Pensioners Centre

47-51 Chalton Street

London NW1 1HY

Tel 020 7388 9807

Government Websites

www.dss.gov.uk
(general information on state benefits)

What to do and when…

In your 20s

Join your employers pension scheme if you can. Consider a personal scheme if your company does not run a scheme

In your 30s

Try to maximise your pension contributions. An employee can pay up to 15% of her pay and perks into the company scheme. If you are getting divorced make sure you know how much your partner has in investments, savings and pensions before agreeing a settlement.

In your 40s

Try to top up your pension, either through a company additional voluntary scheme or by putting as much as possible into your personal scheme

In your 50s

Start thinking about when you want to retire: you can start drawing on your private

pensions from the age of 50 (although you will usually get far better value if you hold off). Your pension provider or an Independent Financial Adviser should be able to give you an assessment of the income that could be derived from your private pension savings. Get a forecast of your state pension entitlement by filling in DSS form BR19

60 onwards

You will start receiving state pension benefits at 60 – or up to five years later if you were born after April 1959

by kind permission of the The Fawcett Society, 45 Beech Street, London EC2Y 8AD Tel 020 7628 4441 Fax 020 7628 2865 www.fawcettsociety.org.uk
Source: Jill Insley. Copyright the Observer 10/1/99