Women Fight for Right to a Full State Pension

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Women Fight for Right to a Full State Pension

By Teresa Hunter, Sunday Herald

March 7, 2004

Women’s rights groups and charities for the elderly are joining forces to call on the government to take urgent action to end the misery, which many women face in retirement.

The Equal Opportunities Commission (EOC) has handed the government a six-point plan aimed at preventing poverty in old age for future generations of women.

Equality action group, the Fawcett Society, has warned Labour they will risk losing the next general election unless they reform the state pension. According to its research, three-quarters of women approaching retirement, aged 55 to 64, believe Labour pension’s policy is a failure.
Two charities for the elderly, Age Concern and Help The Aged, are working closely with the lobby groups, and are also campaigning vociferously on behalf of elderly women.

UK pension arrangements, both state and private, are a disaster for most women. The state pension fails to protect them. Only one in 10 gets a full state pension, compared with nine in 10 men.

They often accrue very little by way of occupational pension and even when they do, they have to pay more for an annuity than a man. The main plank of this government’s pension’s policy, the pension credit, actively discriminates against them, and makes saving for retirement madness for many wives and mothers.

To avoid a miserable old age, young women need to act now, and throughout their productive years to ensure they at least protect their basic state pension, which is the most valuable piece in the planning jigsaw. It is guaranteed by government and will keep pace with inflation.

But many women currently of working age may be unaware of the extent to which their own pensions have been badly damaged by career breaks and part-time working.

The first step, therefore, is to ask for a state pension forecast. To qualify for a full state pension, currently £77.45 weekly, a woman must have made full national insurance contributions for 39 years.

In theory, if she is not working, because she is looking after children or elderly or disabled relatives her contributions are protected, through Home Responsibilities Protection (HRP).

To qualify for HRP, a mother must be out of work for a full tax year, during which time she is also receiving child benefit.

If they have a child under six, HRP will protect not just their basic state pension, but their top-up second state pension. For the next 10 years though, all they get is basic state contributions.

Essentially, when women retire, the Department of Work and Pensions will see how many full years HRP they have and then knock that off the usual 39-year qualification. Therefore if they are at home for 10 years, they might only need 29 years’ worth of National Insurance contributions to qualify for a full state pension.

As ever though, the devil is in the detail. If they leave or join the workforce during a tax year, which most almost certainly will, then their record of full-year protection will be broken. But it is even more complicated than that.

Once back in the workforce, a woman must earn a certain level of income before her pension is protected via NI contributions. Her earnings must be higher than £77 (the lower earnings limit at which contributions begin) multiplied by 52 weeks of the year.

In practice therefore, unless she earns £4004, her record will be broken. This may not sound much, but many women with young children, dip in and out of work, perhaps as agency nurses or teachers or through casual work in a supermarket. These mothers may well be oblivious to the fact that they are sacrificing their HRP, while not earning enough to otherwise protect their pensions.

It is possible to pay back contributions, by either filling in missing weekly gaps or making good a whole year at a cost of £361.40. However, this must be done within six years of the break, which is why women cannot afford to wait until retirement to discover how much they are due.
One of the major elements in the EOC’s battle with the government is its campaign to allow women to be able to repay missed contributions throughout their lives.

The rules protecting those caring for a relative are far more onerous still. Women must be able to prove that they are providing specialist full-time essential care. For many applicants this will involve specifically applying for the protection, which they may not know about.

Another iniquitous regulation which the EOC wants banned is the 25% cut-off rule. If their contributions are just above 25% the best they could hope for was a quarter pension; less, however, they get nothing – those contributions have been wasted.

Some women may qualify for a married woman’s pension based on the husband’s contributions. Men must have a complete NI record for 45 years to earn a full state pension. If they do, their wives may qualify for a £46.35 married woman’s pension.

The most vulnerable women of all are likely to be widows and divorcees. Widows can qualify for a widow’s state pension based on their husband’s contributions.

However, the demise of final salary schemes is very bad news for all women. These schemes typically paid some comfortable survivor pension benefits to widows.

Where schemes have gone bust and men have lost their pension, their wives have also lost all their financial security in old age.

The EOC is concerned that the massive switch to money purchase pensions threatens women with even greater poverty in old age. These pensions do not automatically include any provision for a spouse.

This must be bought separately through a joint life annuity. Yet most men just take out an annuity on their own lives. Given that women tend to live longer, the wives are left with no pension when the annuity holder dies. Fewer than two out of 10 people buying a pension opt for a joint annuity, and given the pressure on pension pots and savings, that is unlikely to change.

The EOC therefore has called on the government for an amendment to the pensions bill currently going through parliament, which would prevent one partner in a marriage buying a single life annuity, without the other giving their specific permission in writing for that to happen. Divorcees can be left in an even more vulnerable position. They can still claim a minimum £46.35 married woman’s state pension based on their former husband’s contributions, provided they don’t remarry. But that would hardly be enough to live on.

Even if they attempt to save for retirement to bridge that gap, they will be penalised because of the way the means-testing associated with pension credit works. Pension credit is calculated on the assumption that they have a full state pension, awarding extra cash to reward savers.

However, if they receive only a fraction of a state pension, your savings simply fill that gap, which the state would otherwise have made up.
This means that for many women, it is simply bad advice to recommend their saving for retirement, unless they can build up a substantial pension in their own right.

Even more worryingly, there may be little point in taking a share of their husband’s pension on divorce, because it will do little more than remove them from the means test net.

The EOC also wants women to be able to lump together part-time earnings, to bring them closer to the lower earnings limit when they can begin accruing NI contributions.

An EOC spokeswoman said: “Many women have a number of part-time cleaning jobs, for example. If these are put together they can benefit from pension contributions.

“Often they conceal earnings because they do not want to pay NI. But if you earn more than £77 weekly but less than £89, you can accrue contributions without making any NI payments.”