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Women and Pensions

Issue date

TUC Report

The problems faced by women

Everyone needs a pension, but when it comes to pensions, women have been losing out. The governments Pensions Green Paper, which was followed by the Pensions Bill, failed to address the key issues faced by women when it comes to pension provision.

The trade union movement have fought hard for a better pension deal for women, for example winning rights for part-time workers to join occupational pension schemes and to backdate their membership.

However, despite the good work of the trade union movement, when it comes to pensions women still do not do as well as men. In fact on average, women’s retirement income from all sources is only 53% of men’s. Only 30% of women receive a private pension in their own right [1] .

Women pensioners are particularly affected - single women pensioners are half as likely again to be poor as single male pensioners, and women pensioners in couples have the least financial independence of any group in society, with disposable individual incomes of just a third of those of a male in a pensioner couple.

Table 1. Average gross individual income by gender and family type 2000/01

Family type



Single pensioner



Pensioner couple



Source: Individual Income 1996/97-2000/01.

Notes: Figures in £ a week.

The income of a woman in a pensioner couple is the income that she has accrued in her own name. No assumption about the degree of access she has to her partner’s income has been made. 7.1: Average gross individual income by gender and family type 2000/01

While the government’s Green Paper noted that there is a variation in the position for women it only refers to full-time and part-time workers. There are considerable differences among women in terms of ethnicity and social background, for example only 3% of Pakistani women have an occupational pension [2] . The issue of women and pensions is wider than just gender differences.

The problem surrounding women and pensions goes much deeper than not having saved enough for retirement and broken work records. Women are still earning less than men; closing the gender pay gap will ensure that women can save more for retirement. It is also important to point out that there are far more women pensioners compared to men, this is partly due to the lower retirement age for women (60 compared to 65 for men) although this is being increased to 65 between 2010 and 2020, there are 6.9 million women pensioners and 3.9 million men. [3]

In the report we look at why women have worse pensions than men, what the government are doing to tackle the problem, and finally what the TUC believes should be done to eliminate poverty for women in retirement.

Why women face these problems

The main reasons why women face greater poverty in retirement are:

  • Fewer women than men belong to occupational pension schemes. While the number of women in occupational pension schemes has been growing over recent years, latest figures show that only 39% of women belong to an occupational pension, compared with 52% of men (this includes full and part time working).
  • Women have less time to build up pension rights. Women tend to take more time out of the labour market than men, for example to look after children or elderly relatives. So because they spend less time in paid work, there is less time to build up a good pension for retirement. Even taking full-time and part-time employment together, the total employment rate for women overall is nearly 10 percentage points lower than that for men. Employment rates are lowest for lone mothers, particularly those with young children.
  • Many women lost out on pensions if they divorced. Until recently, pensions have generally been ignored in divorce settlements. So women who stayed at home to look after children, forgoing a pension of their own often found themselves with out a pension if they later divorced, and even the new legal requirements have not had a great impact on pensions sharing in divorce cases.

· Women are more likely to work for employers that do not have pension schemes. Women are more likely than men to work for employers that do not run occupational pension schemes. So many women are denied the opportunity to save for a pension. The sector in which an individual works gives a very clear guide to how likely they are to have an occupational pension, and if so what type. Part-time female employees in low status jobs fare particularly badly, with only 15% of unskilled women working part-time in a company pension. The New Earnings Survey provides comprehensive statistics here that cover full-time male and female employees [4] . The same study found that some kinds of jobs were significantly less likely to provide occupational pensions. A study by the then Department for Social Security published in 2000 found that some kinds of jobs were significantly less likely to provide occupational pensions 'Namely those which were part-time, temporary or seasonal, located in small firms, based in the manufacturing, distribution and construction sectors, and occupied by women. The chance that a job would carry a pension was more closely linked to industry than occupation, being particularly high in public administration, and the formerly publicly owned energy and transport sectors.

  • Women generally earn less than men, so there is less money to put by for a pension. Because women generally earn less than men, they are less able to afford to pay in to a pension scheme. Also, because some occupational pensions are based on earnings at or near retirement, women’s pensions will tend to be worth less than those of men. For men the annual earnings total was £27,437, 38 per cent greater than the annual total for women of £19,811.

Average hourly earnings of full-time employees by ethnic group and sex: UK Spring 2000

Women (£)

Men (£)

Earnings ratio [5] (%)

















Mixed/other ethnic groups








[1] The ratio of women’s to men’s earnings expressed as a percentage Source: Labour Force Survey

Employees, annual average gross earnings £ per annum

Full time average



Women as % of men

FT Manual




FT Non-manual




FT All




FT Bottom 25%




FT Median




FT Top 25%




Part time employees




Part time employees, weekly earnings (excluding those whose pay was affected by absence) £ per week





Bottom 10%




Bottom 25%








Top 25%




Top 10%




The table below illustrates the difference between men and women full-time and part-time

  • New Earnings Survey 2002; part time annual earnings from ONS estimate in Labour Market Trends December 2002.
  • Pension schemes have discriminated against women in the past. For example, some schemes - including the state pension schemes- did not provide widowers pensions and many did not allow part-time and temporary workers (mainly women) to join. In fact, it was only in 1990 that occupational pension schemes were required to offer women and men equal pension benefits. Even after this many women who worked part-time and have retired have missed out.
  • State pension system still discriminates against women. The basic state pension and the state second pension allow for periods of caring and helps those on low incomes, however, only 10% [6] of retired women currently receive a full basic state pension based on their own national insurance contributions. In addition the 25% rule that means that to receive any state pension someone needs to qualify for at least25% full pensions. Women who have paid fewer than 10 years full contributions receive no pension.

What are the government doing?

In June 2003 the government published its response to the Pensions Green Paper [7] . The main implications that arise from the Green Paper are to encourage wider thinking in the area of pensions and women. The government has said that it will examine ways in which National Insurance cover could extend to include more women, as far fewer women build up a full National Insurance record in their own right, even though 64% of the pensioner population are women. The recently published Pensions Bill will do nothing to alleviate women's poverty

While most men generally get a full basic state pension in their own rights many women do not, because of breaks in their working lives bringing up families. So to help with this problem, since 1978 anyone (man or women) who is away from work and getting Child Benefit for a dependant child (up to 16, or 19 if still in full-time education) gets ‘home responsibilities protection’ (HRP). There are similar rules if you looking after a dependent invalid. This makes it easier to qualify for the basic state pension under the National Insurance rules.

In April 2002 the government replaced the State Earnings Related Pension Scheme (SERPS) with the State Second Pension (S2P). The introduction of the State Second Pension (S2P) aims to address some of the problems faced by women who spend time out of the labour market.

The State Second Pension treats any employee earning less than £10,800 a year but more than the lower earnings limit (currently £4,004 a year) will be treated under S2P as if their earnings were £10,800. However the very low paid remain outside the system, while those that earn a bit above them will do considerably better that they would have done in the past under SERPS. HRP as mentioned above did not apply to the SERPS pension, but the government has now put in some similar protection for S2P. It only applies while the youngest child is under the age of 6 and not right up through their school days as with HRP.

The government has also changed the age at which women can draw a state pension, currently women can draw their state pension at age 60, however this will be increased to age 65 to match men’s retirement age. The change is being phased in from April 2010, with women born after 6 April 1950 the first to be affected. By 2020, any women born after 6 March 1955 will not be able to draw a state pension until she is 65.

What should be done?

The TUC believe that everyone should be able to retire on a decent income; one which allows full participation in society. The issues that need to be addressed are how do we change the system so that women no longer retire in poverty, what can and should government be doing to ensure that today and tomorrow’s women pensioners do not live in poverty when they retire?

The challenge here is to redesign the pensions system to ensure that women who have had low paid jobs throughout their working lives do not retire into poverty. The TUC believes that the following options will go some way to addressing these issues and we therefore call upon the government to:

  • Abolish the ’25 per cent’ rule that stops people with less than 10 years’ contributions getting any state pension.
  • Allow the backdating of NI contributions beyond the current six-year limit, and encourage women over 60 in work to continue to build up entitlement to the basic state pension by paying NI contributions beyond age 60.
  • In order to tackle some of the problems faced by women the government introduced stakeholder pensions. The TUC saw this as a positive development because the charges are low and workers can contribute when they can afford to do so. However, employers are not contributing to stakeholder pension schemes, workers are much less likely to save for a pension if their employer makes no contribution. Compulsory employer contributions to all workers pension schemes would therefore alleviate some of the shortfalls for women. However there will always be groups of individuals for whom private provision is inappropriate, for these groups only the state can provide the necessary levels of benefits and security.
  • Even with the recent changes to the National Insurance system, women will still be losing out on state pension entitlement. The TUC are planning a full report on National Insurance and how the system could be used to benefit those women, such proposals will examine the level of the LEL and whether this could be changed to ensure that more women are able to benefit.
  • The possibility of furthering the role of the state second pension so that it includes those below the LEL and those who have children up to the age of 16 (or 19 if in full-time education), as is the case with HRP.


It is clear that urgent action is need to ensure that today’s and tomorrow’s women pensioners can have a decent income in retirement. The government needs to act now to ensure that the basic state pension treats everyone equally. While the UK continues to adopt a voluntary approach to occupational pension provision it is difficult to see how women in jobs or sectors with low coverage even being able to help themselves build up significant private pension. As such the inequality in the UK private pension system will continue to grow.

Early assessment shows that there are a number of initiatives the government could take to close the pensions gap. Further assessment will be published by the TUC over the coming months.

[1] EOC Response to the DWP Pensions Green Paper: Working and Saving for Retirement March 2003

[2] Ginn, J. and Arber, S. (2001) ‘Pension prospects of minority ethnic groups: inequalities by gender and ethnicity’ British Journal of Sociology 52(3) pp.519 - 539

[3] Curry and O’Connell (2003)

[4] New Earnings Survey 2001- Analyses by wage negotiating groups: analyses of pension categories: Pension type by industry sector and broad earnings ranges

[6] DWP March 2003

[7] 11th June 2003