Sexual equality? In pensions, it hasn't happened
How can you save when you have to take time off? The system is punishing millions of women
Sunday 21 May 2006
Amid the voices of dissent that greet the Government's plans for pension reform, due to be announced this week, will be ones with a particular tone - female.
Despite an encouraging leak late last week that the White Paper proposals will include a cut in the number of years required (from 39 to 30) for women to qualify for a full state pension, the document is unlikely to feature a reform recommended by Lord Turner in his report on Britain's long-term savings crisis: the introduction of a universal basic pension.
This policy - based on residency and not on contributions - would do away with the need to rely on years of working for entitlement. At a stroke, it could benefit hundreds of thousands of women struggling to secure funds for their retirement because they haven't been able to build up enough contributions due to lower pay and time off for children.
Although the female-friendly plan had secured support from the National Pensioners Convention as well as Lord Turner, its cost and complexity is likely to rule it out, warns Tom McPhail of independent financial adviser (IFA) Hargreaves Lansdown.
"A universal pension would be the single best thing that the Government could do for women's pensions, but it is unlikely to happen any time soon."
The White Paper will, however, offer some details of how a separate national pension savings scheme (NPSS) might work. This other major Turner suggestion would mean that all employees who are not already members of a pension plan would be automatically enrolled into a scheme - with an opt-out if desired - and pay 4 per cent of their salary in return for a 3 per cent contribution from their company and 1 per cent from the government.
While that might encourage more women to put money by for their retirement, it will only work for those who are in a position to do so.
"The NPSS will not be enough on its own," says a spokesman for the Fawcett Society, which campaigns on women's issues. "Many women simply earn nothing at all, or too little to save."
That women are much poorer than men in retirement is due to a miserable mix of factors.
First, the basic state system in effect punishes women for taking time off work to have children by limiting the amount of national insurance contributions they can build up.
Second, even when they are in a full-time job, they tend to earn less than men, so their private pension payments are smaller.
Third, when they return to work after having children, it might well be on a part-time basis, so they have less chance of being offered membership of a company scheme.
And fourth, because they are often dependent on their partners and tend to spend what they earn on their children, they don't make their own retirement provisions.
Churn these ingredients into hard figures and they make a bitter dish. Fewer than one in five women qualify for the full basic state pension, which is currently £84.25 a week, whereas 98 per cent of men are eligible, according to government statistics.
To qualify for the full pension, women need to work for 39 years (men, 44 years). Due to career breaks, it's no surprise that many fall short.
Worse, if a woman retires with less than a quarter of the qualifying years, she won't receive anything at all under what is known as the "25 per cent rule".
Today's figures suggest two million women have failed to build up any basic state pension entitlement. Single female pensioners are the poorest of all, with one in five living in poverty, reports the Department for Work and Pensions.
For private provision, the figures are no less forbidding. Only 35 per cent of women have a pension fund, according to Investec Private Bank, mainly because they say they don't have any money to spare each month.
Indeed, for every pound of retirement income received by men in a pensioner couple, women get less than 32p, says the Women and Equality Unit.
Everyone, including the Government, agrees there is a problem and the Conservatives have even created the post of spokesman for women's pensions. However, for all the campaigning of the past few years, little movement has been made towards a solution. That, say some in the financial services industry, points to women having to do more to help themselves.
"They retire earlier and live longer than men, but are simply not making enough provision for their futures through sound retirement planning," says Mark Summerfield, the director of savings at Co-operative Financial Services.
Julie Minette, 29, is concerned about her failure to start saving into a pension. Although her employer does offer a stakeholder scheme, she has yet to join.
"I like the idea of the NPSS. I wish they would change it so that it's up to me to opt out of a pension scheme," she says. "A pension seems such a long time away, and looks set to be even later with the retirement age being raised by the Government."
Julie is studying part-time for an economics degree and says she sees that as her "investment for the future".
So what should women be doing to improve their retirement prospects?
Full-time work is not a prerequisite for a pension fund. Even those who earn nothing at all, but rely on a partner for income, can put up to £2,808 a year into a stakeholder plan. Women should ask their partners to make the contributions on their behalf if they are unable to do so.
Meanwhile, home responsibilities protection (HRP), a government programme, can improve state pension benefits. You can claim for each year in which you are off work caring for a child, though these must be full tax years - so it's no help to those who are off for nine or 10 months.
Scottish Power hit with sales ban by regulator
There are 'dark corners' of the investment and pensions industry, says Pensions Minister
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
Midweek Money: The end (of the tax year) is nigh: act now
Weekly Money: round-up of the personal finance stories you may have missed 2 to 6 March
- 1 Tourist films plane's descent just metres above packed Caribbean beach
- 2 Kate Moss: Previously unpublished nude photo revealed by Mert and Marcus
- 3 Indian woman creates 'Marriage CV' after parents put her on dating site: 'Definitely not marriage material. Won’t grow long hair, ever'
- 4 World Book Day: Boy 'excluded' from school after dressing up as Fifty Shades' Christian Grey
- 5 Bad Jews poster 'censored' on London Tube
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Durham Free School: 'Creationism taught at' free school facing closure
End of the licence fee: BBC to back radical overhaul of how it is funded
Elif Shafak: Turkish author warns against rise of British nationalism
Most people think legal tax avoidance is just as wrong as illegal tax evasion, poll suggests
Nigel Farage promises Ukip will not 'stigmatise' would-be migrants – and says he wants 'everyone to speak the same language'
iJobs Money & Business
£13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£12 - £15 Hourly Rate: Jemma Gent: In this role you will report to the Head of...
£8 per hour: Recruitment Genius: This Pension Specialist was established early...
Day In a Page
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads