The gender ‘pensions gap’ is significantly worse than the gender pay gap, and the problems should be addressed in this week’s Budget.
Leading pension campaigner Ros Altmann claims women are losing out on both state and workplace pensions and as a result have pensions that are £7,000 a year less than men.
Altmann says a number of problems could be fixed by the government, which would help narrow this gender gap.
She points out that while there are initiatives to tackle the gender pay gap in the workplace there appears to be no corresponding action to redress the pensions gap — despite the fact that ONS figures shod the majority of the poorest pensioners are women. An analysis of the Chartered Insurance Institutes Wealth and Assets survey also shows the median pension wealth for women aged 65 to 69 is £51,500, one third of the £156,500 for men of the same age.
Altmann points out that there are a number of factors contributing to this pension divide. This includes: lower lifetime earnings, more part-time roles as well as time spent out of the workplace due to caring responsibilities.
In the past these issues have mean women have not qualified for state pension credit, and it can still lead to issues when it comes to be eligible for workplace pensions.
She says: “In a pension system where pensions are related to earnings, obviously those who earn less than others will have less pension in later life.”
Altmann says that one of the biggest problems when it comes to private pensions is that those earning less than £10,000 are not automatically enrolled into a workplace pension. It is mostly women who fall into this bracket.
In additional auto-enrolment in net pay schemes force women earning under £12,500 a year to contribute 25 per cent extra for their pension, reducing take-home pay and raising opt-out risks. Again while this also affects men, there will be more women in this lower pay bracket.
She says another serious issue, which needs urgent recognition, is the impact of divorce on women’s pensions. The government introduced the excellent idea of pension sharing on divorce, to help women share their former partner’s pension. But the lack of financial awareness and the inadequacy of protections for divorcing women, is leaving many at risk of losing out significantly when their partner fails to adequately share their pension.
She says: “Even when the partner has achieved a legal pension-sharing order, it is possible for women to lose out because their ex-husband may transfer their pension out of the scheme without her knowledge. Trustees are not required to alert the ex-wife to this, leaving some women at risk of not receiving the share of pension they are entitled to. With the Pension Schemes Bill going through Parliament at the moment, I have laid an amendment calling on trustees to ensure they get consent of a partner who is entitled to pension-sharing, before agreeing to allow a member to cash-in or transfer their pension.”
There are also problems with how women qualify for state pension credits. At present if one member of a household earns over £60,000 the family does not qualify for Child Benefit. However women still need to apply for this benefit to ensure they get their state pension entitlement for that year.
The new state pension is supposed to reflect women’s caring responsibilities. But Altmann points out that a credit is only be paid on a full year of caring, partial years are not taken into account.
She says the overall pension gap has been exacerbated by historical injustices within the pensions system.
“Women have always been second-class citizens when it comes to pension provision. The State Pension rules were designed without the needs of women as independent individuals in mind.
“The National Insurance State Pension originally treated women as being able to rely on husbands for their pensions, which meant they often had no State Pension in their own right.”
arge against it, but they may not realise the consequences for their pension. Altmann is calling on the chancellor to tackle some of these issues. She says: “Starting with the State Pension the chancellor should ensure everyone earning below the lower earnings limits is credited for the state pension.”
When it comes to private pensions she says there must be efforts made to address the net pay problem. AE threshold should also be reduced so those earning under £10,000 are automatically enrolled in these workplace savings schemes.
She adds: “Steps should also be taken to improve workplace financial education to help women understand pension, as well as considering ways of helping women and partners contribute to pensions during caring years.
“With a rapidly ageing population and millions of baby-boomers now reaching their seventies, the need for good pensions – and the even more expensive costs of later life care – will grow significantly in coming years. Progress has been made, but there is much further to go before we can ensure women’s risk of later life poverty is more fairly addressed.”
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