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OPDU Report 24
- May 2008
If there is one thing for certain in the world of pensions, it is that women’s pensions are much more problematic than those for men. This stems largely from the fact that traditionally women have followed different lifestyles than men with often frequent breaks in their employment record and spells at home bringing up children, supporting the family, caring for elderly relatives and so on. Most people would accept that by and large women get a raw deal out of the pension system, often ending up in retirement without adequate financial provision for themselves and having to depend to no little extent either on their husband or on the state through means tested benefits. Things have, of course, changed quite a bit over the last 20-30 years. More women have chosen not to stay at home and have returned to work after the birth of their children. This has enabled them to continue making contributions into the state pension scheme as well as to any employer-sponsored private provision available. Legislation has also slowly improved the position by bringing in changes specifically directed at women such as the phasing out of the “married woman’s stamp” (1977), the introduction of Home Responsibility Protection (1978), Equality of access to Occupational Pension Schemes (1978)and Pension Sharing on Divorce(2000). But overall it remains a fact that many women do not have any private pension arrangement and rely on the state pension as their main or only pension provision. And yet here too they suffer in comparison with less than 30% of women qualifying for the full basic state pension compared to over 90% of men. It was probably this statistic more than any other which persuaded the Government to bring in the changes in last year’s Pensions Act to ease the qualifying conditions for the full basic state pension. From 6 April 2010 women (and men) will only be required to have 30 national insurance qualifying years instead of as now, for women, 39 years. This together with other changes, e.g. to Home Responsibilities Protection, will mean many more women will be able to receive the full state pension bringing them much more in line with men. Because we believed these were important changes which women needed to know about and take account of in developing their pension plans for the future, we decided to re-open our special Women and Pensions Helpline for an initial 6 week period on 4 February this year. We had run this helpline before back in 2004, some of the findings from which I wrote about in an article which appeared in The OPDU Report – Issue 18 in May 2005. Our experience was similar again this time around. We were inundated with calls from women (and some men) eager to know about the changes and how they would affect them. We also had some of the old chestnuts about the married women’s stamp and the lack of benefit it produces, the consequences of having taken the old public sector marriage gratuities, widows’ benefits, part-timers rights to join occupational schemes, pension contributions during maternity absence, pension rights on divorce and so on and so forth. In relation to the 2010 changes there were a few surprises. Whereas many of the women who contacted us seemed to have heard of the reduced 30 year N.I.qualifying year requirement, most of them had not appreciated that this was a complete “cliff edge” change. In other words if a woman reaches her 60th birthday on 5 April 2010 she will still need 39 years to get the full pension whilst a woman whose 60th birthday is a day later on 6th April 2010 will need only 30. Some callers thought there was a way round this by staying on at work and not retiring until after 5 April 2010. But we had to tell them that wouldn’t work. It is your date of birth that determines it not your actual retirement date which is therefore quite irrelevant. Another change that many women did not appear to know much about was the longer standing plan to push women’s pension age back from 60 to 65 progressively between 2010 and 2020. Here again it will be your date of birth that will fix your exact pension age between 60 and 65 in the next decade. We have included a very easy to use on-line state pension age calculator on our website to help people find out their own position. It includes of course the more recently announced changes which will extend pension ages for both men and women to 68 eventually by 2046. We had a lot of questions about N.I. contributions and in particular the need/desirability for making voluntary contributions in the light of the 2010 easements. Again it was apparent that the ability for someone past pension age drawing a reduced rate pension to enhance that pension by making good gaps for years back to 1996/97 was news to some enquirers. So, all in all I believe this further incursion of ours into the rather arcane world of women’s pensions was a very worthwhile exercise. It illustrated how important having an adequate state pension is to many women and what a bonus it is if they are able to build up a private pension in addition. It has also reminded me very forcibly just how complicated this subject has become. As usual with pensions, progress and development seem to be always at the expense of straightforwardness and simplicity. Getting the balance right is the challenge for the future. Whether we shall ever achieve it has to be in doubt. Malcolm McLean OBE |
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