Ros Altmann on why women STILL lose out in retirement

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Ros Altmann:


Ros Altmann: 'The gender pensions gap remains wide and new barriers have been introduced'

Ros Altmann: ‘The gender pensions gap remains wide and new barriers have been introduced’

Women and men’s state pension age might finally be equal at 65, but unfairness persists when it comes to retirement finances. 

That’s according to former Pensions Minister and campaigner Ros Altmann.

She tells This is Money of 10 ways she believes women are still penalised on pensions – and the potential solutions. 

Men and women’s state pension ages will be equalised today.

After decades of difference – when women received their state pension at 60, while men had to wait until 65 – this is the historic date when women and men will both have a pension age of 65.

Women’s pension age has been rising since 2010, under legislation passed in 1995, but new measures in 2011 accelerated the increases and the pension age for both men and women will keep rising to 66 by 2020.

But equal state pension age does not mean pension equality. Women have always had lower pensions than men, leaving them at greater risk of later life poverty, especially as women tend to live longer than men.

An increasing proportion of women are single and cannot rely on a partner’s pension for retirement income.

Women in their 50s and older have lost out most, but younger women face penalties too, as all pensions – state, workplace and private pensions – discriminate against women.

Although women have made enormous strides pushing through glass ceilings in the workplace, the gender pensions gap remains wide and new barriers have been introduced.

While some of the inequalities date back many decades, others are new problems created by recent legislation.

Even the new state pension system and recent policy changes are introducing new unfairnesses that predominantly affect women, rather than men.

Here are the 10 top reasons I believe why women lose out in pensions relative to men and the measures needed to address them.

The Government needs to act urgently to fix these loopholes which cause problems for so many women.

1. Women’s state pension age increased by more than men’s at shorter notice

The Government increased the pension age for older women by up to 18 months with only five years’ notice, giving many of them insufficient time to prepare. 

Men had at least seven years’ notice of a 12 months rise.

The short notice changes have caused significant hardship to many women, especially as many did not know about the 1995 plans to increase their pension age from 60 either.

Remedy: The Government should consider making payments to women facing hardship. 

Many women rely entirely on state pension for their retirement income and have not had time to build up private pensions.

The Department for Work and Pensions could also consider allowing early access to the state pension if needed.

2. State pension triple lock discriminates against women

The much-vaunted ‘triple lock’, which is supposed to increase state pensions by the best of price inflation, earnings inflation or 2.5 per cent, leaves out the poorest and oldest pensioners, most of whom are women.

More than half a million over 80s (of which nearly 450,000 were single women) receive pension credit – a means-tested benefit to lift pensioners out of poverty.

This income for the poorest pensioners is only tied to earnings, while the new state pension (which pays more than pension credit) is triple-locked.

Remedy: Ensure that pension credit is protected the same way as state pensions.

Unfairness persists: Younger women face penalties too, as all pensions - state, workplace and private pensions - discriminate against them, says Baroness Altmann

Unfairness persists: Younger women face penalties too, as all pensions - state, workplace and private pensions - discriminate against them, says Baroness Altmann

Unfairness persists: Younger women face penalties too, as all pensions – state, workplace and private pensions – discriminate against them, says Baroness Altmann

3. Very lowest earners (mostly women) are left out of National Insurance state pension

Tens of thousands of working women do not receive any credit for their state pension. 

Those earning below the £6,032 lower earnings threshold in one or more jobs, get no credit for state pension at all.

If they did not work, or earned more (between £6,032 and £8,424) the rules allow them to pay no National Insurance but still ‘earn’ a year of state pension.

The inflexibility of the National Insurance system excludes those who may have several jobs but each pays less than £6,032. 

The Government has known about this anomaly for years, but not addressed it.

Remedy: Government should reduce the lower earnings threshold, or abolish it, and allow all workers with multiple jobs to claim credit for state pension regardless of their earnings in each job.

4. Women who don’t claim child benefit – even if they are not entitled to it – lose state pension

Families where one partner earns more than £60,000 are not eligible for child benefit. 

But mothers must claim it, even if they know they are not entitled to it!

If they do not claim this benefit they know they can’t receive, and aren’t paying National Insurance some other way, they lose credits towards their state pension to which they would otherwise entitled.

And they cannot backdate credits by more than three months if they discover this in future years.

Remedy: Ensure all women looking after children can claim credits for state pension and fully backdate any claims.

5. Workplace pensions discriminate against women

Women have lower lifetime earnings and therefore lower workplace pensions. 

Occupational pensions for women suffer from smaller pay packets, interrupted careers and caring duties.

As prime carers for both children and adult loved ones, women usually work fewer years, and also earn less than men.

Women were often forced to leave company pensions if they married or worked part-time and tended to work in occupations where employer pensions were less prevalent.

Remedy: Help women retain pension membership during maternity leave or childcare, and encourage employers or their partners to contribute for them.

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6. Auto-enrolment excludes anyone earning below £10k a year (mostly women)

Auto-enrolment leaves out millions of women. 

Anyone earning less than £10,000 a year – often part-timers, who are predominately women – is not automatically enrolled into a pension and will not get the benefit of their free employer contribution.

If they are in more than one job, but each pays below £10,000 they miss out altogether on the behavioural nudges that have been so successful in widening pension coverage.

Remedy: Remove the £10,000 earnings limit for auto-enrolment.

7. Low earners (mostly women) often pay 25% extra for their workplace pension

Those earning between £10,000 and £11,850 (£12,500 from next April), who are auto-enrolled into their employer pension, are often being forced to pay 25 per cent too much for their pension.

This affects more women than men and is something most people seem unaware of. 

If the employer uses a particular type of pension scheme, that operates on what is called a ‘net pay’ basis, then instead of receiving the tax relief they would have in a different type of scheme, they have to pay extra to their pension provider.

This is one of the largest injustices in pensions. Low earning women need most help to build up pensions, but are forced to pay so much more without knowing it.

Remedy: Ban pension providers and employers from putting workers into pension schemes if they will not receive the 25 per cent bonus.

8. Occupational pensions may not aggregate women’s pension service after maternity

Women in final salary pension schemes, who take time off to have children and then come back to work, are often losing out relative to men who do not have interrupted careers.

Some pension schemes refuse to merge periods of pension service, which results in these women receiving much lower pensions on retirement.

What are final salary and defined contribution pensions?

Generous gold-plated defined benefit – or final salary – pensions provide a guaranteed income after retirement until you die.

Most private sector employers have now replaced them with stingier and riskier defined contribution pensions.

These take contributions from both employer and employee and invest them to provide a pot of money at retirement, but the worker bears all the investment risk.

Remedy: Encourage pension trustees to allow women’s pension rights to be preserved during caring responsibilities.

9. Many men buy single life annuities that don’t provide for their widow

In defined contribution pensions, past rules encouraged men to buy only single life annuities, since they were told to ‘shop around for the best rate’.

These annuities provide no cover for a spouse, leaving women with no private pension if widowed.

Remedy: Automatically enrol everyone looking to take money out of their pension or buy an annuity into free PensionWise guidance.

10. Women’s pensions are not properly protected on divorce

Even though the law allows pensions to be shared on divorce, many women fail to factor this into their settlement, therefore losing out in retirement. 

But, even with agreed divorce settlements to share pensions, ex-wives can still lose out because new pension freedom rules can put divorced women’s pensions at risk. 

Pension trustees are not obliged to get consent from the partner to a pension earmarking order before transferring a final salary-type pension. 

Remedy: Ensure that all women with pension sharing orders must give formal approval before former husbands can transfer or withdraw money from their pension.

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