Women and Pensions - November 2011
November 2011
This briefing sets out some of the key public, private and state pension issues that are of particular relevance to women.
Pensioner Poverty
Women are already at a disadvantage with regard to state pensions and are more likely to face pensioner poverty than men. Nearly two thirds of women pensioners rely on Pensions Credit.
Until 1993 many women were excluded from public service pension schemes because part-employees did not have access to the scheme. Many women also have large gaps in their pensions due different career patterns and time spent caring for children or other relatives.
Women are more likely to be low paid than men throughout their working lives. Not only are they less likely to be in an occupational scheme but there are less likely to save in a private pension scheme.
According to Rachel Reeves, the previous Shadow Pensions minister,
'The average 56-year-old woman has just £9,100 of private pension savings compared to £52,800 for a man the same age.'
A report by Age UK and the Fawcett Society called 'One in Four' found that:
- One in four single women pensioners lives in poverty.
- Twice as many women as men rely on means-tested benefits in retirement.
- For every £1 a man receives from a pension, a woman receives 32p.
- One in five women aged between 25 and 34 relies on their partner for a pension.
- More than a quarter of women don't believe it's worth their while paying into a pension.
The State Pension Age
The state pension age for women was due to rise gradually from 60 to 65 by 2020. In 2011, the coalition government announced that it would rise more rapidly, reaching 65 by November 2018 and 66 by April 2020, bringing it in line with men. Under this proposal, by 2020 the state pension age would have been 66 for both women and men.
This was six years earlier than planned, which did not leave the hundreds of thousands of women affected with enough time to plan for their financial futures.
Following campaigns by Age UK and many trade unions, the coalition government agreed to cap the extra time anyone will have to wait for their state pension to 18 months, thus delaying the second rise in the pension age for men and women from April to October 2020.
Public Service pensions
As well as changes to state pensions, women face cuts to their work-based pensions.
For instance, public service pensions will be uprated according to the CPI measure of inflation rather than RPI, significantly reducing their value to members over time as CPI tends to be lower than RPI. Many private sector schemes are expected to follow suit.
The switch to CPI is a stealthy way of cutting pensions. The Independent Public Service Pensions Commission led by Lord Hutton said it cuts the value of public service pensions by 15%.
In the public sector the government has indicated their intention to save £2.8bn per year by 2014-5 by increasing employee contributions to public service pensions.
For many workers this will mean about a 50% increase in the amount they pay into their pension. This comes as public service workers have been subject to a pay freeze and are facing rising living costs.
This increase is in effect an extra tax on public service workers, as the money won't go into improving the schemes, but into the deficit they did nothing to cause.
The government is also looking to reform the public service pension schemes by increasing normal pension ages and changing the design of the schemes, in line with the recommendations of Lord Hutton's report.
Overall because women make up almost two-thirds (65 per cent) of the public sector workforce, and just under 40 per cent of women's jobs are in the public sector (compared to 15 per cent of men's), women will be the disproportionate losers from the changes the government is seeking to make to public service pensions.
Unison has said that more than 3.7 million women could be affected by plans to make them pay more, work longer and receive less pension.
No protection for the low paid part time workers
Although the government has indicated that there will be some protection for low paid workers - those earning less than £15,000 (full time equivalent) will not face contribution increases - this means that part time workers (who are predominantly women) stand to lose out.
A public service employee whose full time equivalent salary is greater than £15,000 but who works part time and has take home earnings less than £15,000 will still face an increase in their contributions.
For example, a part-time nurse who earns a FTE salary of £22,000 a year, but might take home half that sum a year, could see her pension contribution almost double.
The TUC's figures show that 806,000 people are caught out in this way - 12.5% of public service employees. And it is low-paid women who are overwhelmingly the ones affected, making up 90%, (732,000) of those caught in the trap.
Women will be disproportionately disadvantaged by this loophole as 84 per cent of part-time public sector workers are women.
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