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

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.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones