Revealed: A new generation of women face pension inequality

Pic credit: Siemens pension scheme

Just before the Parliamentary recess the House of Commons library produced a new report on pension inequality showing how a new generation of women will lose out again to men unless action is taken now.

The report- The Pension Gender Gap – makes stark reading for millions of women now in work. The focus in this report is on the hurdles facing women to get an equal pension with men.

The main hurdle is the private pension or second pension women receive to top up their state pension. It quotes a Women’s Budget Group pre-Budget Briefing which says that: ‘Private pension schemes, promoted and subsidised by UK governments, are the main reason for the gender gap in pensions, placing women at a disadvantage due to their domestic roles and lower pay’.

The pay gap – still at 7.9 per cent – between men and women is basically discriminating against women getting the same pension as men. When the Conservative government set up the auto-enrollment scheme for a workplace pension in 2012- funded by employers and employee contributions – they excluded anyone not earning enough to pay national insurance.

While it increased the chances of women getting a private pension ( from 40 per cent in 2012 to 86 per cent in 2020) their savings fall away after they reach 35 because they are bringing up children and often take part time work.

As the report says: “The design of automatic enrolment widens the gap between lower and higher earners in retirement and disadvantages those in second jobs.”

Women who take part time work or multiple part time jobs are simply excluded from getting a second private pension partly paid by their employer.

Some low paid women may never get a work pension

And those who never earn enough at work – there are an estimated 500,000 of them nearly all women – never get a second pension at all.

As the Association of British Insurers told MPs on the Commons Work and Pension Committee: “Women disproportionately work in lower paid jobs; 75% of those earning under the £10,000 AE earning trigger are women. They also make up the majority of multiple job holders, as much as 64%. This is significant as their total income could be over the AE earnings trigger, but as it is divided across multiple jobs they will not be automatically enrolled into a pension.’

Fortunately it looks like the Department for Work and Pensions is planning to do something about this though we may have to wait a couple of years before this happens.

A DWP spokesperson said :

“Automatic enrolment has helped millions more women save into a pension, with participation among eligible women in the private sector rising from 40% in 2012 to 86% in 2020 – equal to that of men. Our plans to remove the Lower Earnings Limit for contributions and to reduce the eligible age of being automatically enrolled to 18 in the mid-2020s will enable even more women to save more and start saving earlier.”

But this isn’t the only barrier. The report highlights three other issues, affordable child care, pension rights for divorcees and monitoring pension equality.

On child care the report highlights demands by the trade union, Prospect and the People’s Pension, one of the larger pension trusts, both call for help with child care including tax relief for the care of the under two year olds and a local authority grant for 3 and 4 year olds.

Make pension savings a compulsory part of a divorce settlement

The Pension and Lifetime Savings Association call for the law to be changed so pension rights have to be considered in divorce proceedings.

“The government should consider changing the law to ensure that pensions rights are considered on a mandatory basis as part of divorce. Currently pensions may only be considered if there is a financial settlement considered by the courts. The process of pension sharing on divorce could also be better streamlined to remove friction and delay for all parties.”

And finally the Government Equalities Office should impose a mandatory requirement on the DWP to publish gender pension gap statistics and then draw up proposals to speed up ending the gap. The GEO did not want to comment on this.

There is one ray of hope arising from the new state pension introduced in 2016. It has narrowed the gap between men’s and women’s state pensions. Women got 82pc of men’s pension in 2016. By 2020 it had narrowed to 92pc. But the DWP could not tell me when it would be 100 per cent.

Unless action is taking speedily a whole new generation of women are going to lose out to men. No one wants to suffer the fate of 50swomen who have been so badly treated again. They are already worse off because of the abolition of the second pension in 2016.

Chris Thompson, a retired pension expect, pointed out both men and women lost out over auto-enrollment. “Between 2012 and prior to 6 April 2016 when the new state pension started people were also paying into the state second pension if they were not contracted out.

” From the 6 April 2016 people ceased accruing state second pension so are now much worse off than under the old state pension system. A low earner about £46 pw worse off and a high earner about £67 pw. Another thing to remember is that losses do not take into account loss of inherited and derived rights, loss of GMP indexation if contracted out or increase in NI due to loss of NI rebate.”

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