Examination of Witnesses (Questions 55-59)
DR KATHERINE
RAKE AND
MS AMANDA
ARISS
3 NOVEMBER 2004
Q55 Chairman: We are lucky to have with
us this morning Katherine Rake, from the Fawcett Society, and
Amanda Ariss, who is the Equal Opportunities Commission representative.
You are both very welcome and thank you for your written submissions,
which have been helpful. Just by way of explanation, if you do
not already know, I think that the Committee has always had a
Pension Credit inquiry in its sights and we would have, if we
had more time, added a full-blown inquiry into women and pensions,
but being realistic about the date of the next election and the
programme we have already got we are trying to do the next best
thing, which is to take, in the course of our Pension Credit inquiry,
a particularly deep and special look at how Pension Credit, in
the first instance, is affecting women and we will look at how
it fits into the long-term policy. It is now an important part
of the inquiry and your evidence is obviously crucial to all of
that. Why do not both of you say a little bit about your respective
organisations, just by way of opening the discussions, and we
then have three or four areas of questioning we would like to
put to you.
Dr Rake: I am from the Fawcett
Society and we are the UK's campaign for equality between women
and men, and probably of particular importance to the Committee
is the campaign we have been running jointly with Age Concern
called Let's Make Pensions Work for Women and we have produced
a recent publication, which is a report that I would commend to
the Committee. I hope you have all seen copies of it but, if not,
I will send copies of report 1 in 4 which highlights the
scandal which is pensioner poverty among women in the UK today.
I have been personally working on the area of women and pensions
for about eight years now (so it is a topic very dear to my own
heart) but, also, for the Fawcett campaign it is an area of gender
inequality which I think has been woefully neglected up to this
point but, fortunately, is now recognised by government and by
the Independent Pensions Commission. There is certainly very good
analysis of the problems and what we are keen to see now is some
move towards some of those solutions.
Q56 Chairman: Excellent, thank you. Amanda?
Ms Ariss: Firstly, I would just
like to welcome this opportunity to give oral evidence to your
Committee. The EOC is the statutory body that has been charged
by Parliament with promoting equality of women and men as well
as enforcing the sex discrimination legislation. We have a long-standing
concern about pensions. I think there is a great deal that Katherine
and I are going to agree about this morning because we are coming
at the issues from a very similar perspective of concern about
the persistently low income that many women have in retirement,
which means that the face of poverty in old age is much more likely
to be female than male. I think we particularly welcome that you
have chosen to widen the scope of your inquiry into Pension Credits
to look at how it sits in the broader system because we think
there are some absolutely critical issues there that need to be
addressed.
Q57 Mrs Humble: Katherine, to you first
of all, we have received lots of very interesting documentation
from you and other organisations and we think we know why women
tend to be poor when they are pensioners, tend to have a reduced
entitlement to retirement pension and, also, have fewer savings,
but just in case we have got it wrong, for our record, could you
outline the basic issues, as you see them, and then, Amanda, I
will move on to you because, again, we want reassurance that there
is agreement over what the basic issues are. If there is not,
then you might want to highlight some of the issues as you would
see them.
Dr Rake: I think there are four
really very simple reasons why women are poorer in later life
and will continue to be poorer until we see some reform to the
State Pension system. Those are that women are paid less during
their working lives, and that means they are excluded from the
pensions system overall, or they are simply unable to make the
additional contributions into occupational and personal pensions
saving. The second reason is that they are more likely to take
time out of the labour market to look after children and, increasingly,
to look after elderly people. Those interruptions mean two things:
the first is that there are periods where they simply do not have
any pension coverage at all, especially occupational pension coverage,
and the second is that those disruptions also have a very severe
impact on occupational pension entitlement in particular. So entry
in and out of several different occupational schemes tends to
penalise women's entitlement to occupational pensions, in particular.
The third reason is that women tend to be concentrated among certain
sectors within employment, so there is a very high concentration
of women, obviously, within part-time employment and, equally,
a very poor coverage of occupational and personal pensions within
part-time employment. So, currently, only a third of part-timers
have any access to an additional occupational pension. They also
tend to be in occupations where especially if they are working
in the private sphere there is no additional pension provision
being made. What is interesting is that for those women where
there is a decent occupational pension they are more likely to
be members of that. So there is some balance—I do not want
to overstate the case—and for those women working full-time
and working within the public sector they are more likely to be
a member of their employer's occupational pension, but when you
look at women overall, because of the high numbers of women working
part-time overall they are less likely to be a member of an occupational
pension. That is the third reason. The fourth, which I think is
probably of particular interest to this Committee, is that the
current State system is founded on principles that have not changed
very much since Beveridge's time. There are two underlying assumptions
which are now totally overturned by current demographic and social
trends. The first is that couples will divide between a male breadwinner
and a female carer, and the pension system rewards that, and the
second is that couples will be in a lifelong marriage. Clearly,
both of those assumptions are untrue now but the State Pension
system really has not caught up with that, and unfortunately,
when the Second State Pension system was introduced, and, indeed,
the Pension Credit, it just compounded the problems of some very,
very old, underlying rules within the State Pension system. So
the whole notion of a lifetime's contribution and needing to contribute
for a very extended period over the lifetime, the notion of periods
out of the labour market being the exception rather than the norm
are written, really, very much within the State Pension rules
and they serve to penalise women in later life. So those four
factors—low pay, interruptions to labour market careers,
and a sectoral concentration of women within certain sectors of
the labour market, compounded by a State system which is riddled
with out-dated assumptions, mean that women are poor in later
life now and indeed will continue to be poorer. If I can take
the liberty to add to the fantastic analysis that there has been
within the Independent Pension Commission report, one of the things
we would add there is that although there are trends which make
women's pension entitlement look as though it is going to improve
over the longer term—for instance, higher labour market
engagement and a narrowing of certain parts of the pay gap—the
other side of that is that actually those trends do not affect
all women equally, and what we are going to see is an increasing
inequality among women; so whilst well-educated women who tend
to be engaged in the labour market for a long period of time may
well begin to look more and more like men, in terms of their pension
entitlement, there are other, very significant groups of women
who are simply going to be left behind. For example, very large
generations of lone parents will be coming into pensionable age
within the foreseeable future and they are going to carry with
them enormous labour market penalties. The other thing we highlighted
in our report is the extremely poor entitlement that black and
minority ethnic women have to an occupational or personal pension.
So whilst overall, if you look at the average picture for women,
it may well be set to improve, what we are actually going to see
is an increasing inequality among women; so some women looking
like men in terms of their pension entitlement but a very large
sector of them looking increasingly left behind. So that is, I
think, where we are now.
Q58 Mrs Humble: Katherine, you have answered
my second question as well. I do not mind. However, Amanda, one,
do you agree with that analysis? Secondly, are you aware of any
organisations that would disagree with that analysis, and do you
also share Katherine's concerns that what many people assume is
going to be a much rosier picture for today's generation of working
women might not be as rosy? I just tack on the end of that, in
S2P there is the Carer's Credit that does address one of the difficulties
that today's women pensioners face, which is the lack of continuity
of a contribution record. I just want to throw that in, because
some of the groups that Katherine was talking about who may be
excluded from the job market may benefit from that provision in
S2P, so it might not be quite as bleak. Over to you. You can answer
both questions, you can answer three or four.
Ms Ariss: I think I would like
to start by saying yes, we do agree with the analysis Katherine
has just presented about the causes of the problem and with the
particular problems experienced by some groups of women that she
has highlighted—Katherine referred to ethnic minority women
being particularly likely to have very poor pension provision
and some particular ethnic minority groups of women have much
lower employment rates than the average for women as a whole.
So I think that problem is likely to persist and become very acute.
So we are in agreement about the basic analysis of the causes
of the problem. I think I would like to draw your attention to
the way in which some of those factors Katherine has described
interact with one another. It is very common for women to return
to work after having children and opt to work part-time for a
number of years. Working part-time would affect your income anyway
because you are working fewer hours, but it is exceptionally difficult
to find part-time work in high-skill, high-paying jobs. So often
what we find is that when a women wants to go back to work working
part-time she has to drop two or three rungs down the ladder,
so her income drops dramatically, she is often working well below
her economic capacity, so there is a loss to the economy as well
as to the woman's earnings, and that loss can persist for a very
long time. We have some research under way at the moment which
suggests that even a year of working part-time can have a very
significant, long-term effect on the woman's income; it is very
difficult to regain the position that she once had in the labour
market. I think those problems around the way in which part-time
working is operating in our labour market suggests that although
it is true that women are increasingly highly qualified and engaging
in the labour market, there are still structural difficulties
that are preventing them competing on an equal footing, which
means that, if you like, the sort of trickle-down effect, in terms
of improvement in pension provision, is likely to be slower than
one might expect. We would agree with Katherine's analysis that
there is likely to be a gap between women whose labour market
experience, broadly speaking, resembles that of the average man
and who therefore may well be able to provide reasonably well
for themselves in old age and a large number of women for whom
that is not the case.
Q59 Mrs Humble: What about Carer's Credit
in S2P? That was something very much hailed at the time it was
introduced as helping women who took a career break especially
to be carers, because, of course, in the past they did not get
any kind of notional contribution entitlement.
Ms Ariss: Yes. We obviously welcome
the steps that have been taken to try and make sure that where
women—or indeed men—are taking time out of the labour
market to care for children they do not lose out as a result,
but we do not think those measures are adequate as they stand;
they are still quite complicated and sometimes the eligibility
rules for them mean that you can be out of the labour market caring
for a very large proportion of the tax year but if you are not
out for all of it you do not get any credit. Of course, people's
lives do not align terribly neatly with tax years, and that does
mean that it can be very difficult for people to qualify for things
that might help them otherwise. So we welcome what is there but
we do not think it goes far enough.
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