Memorandum submitted by Fawcett Society
(PC 15)
1. The Pension Credit has put more money
into the pension system, and into the pockets of poor women, but
it remains a sticking plaster for a flawed system in need of more
fundamental change. The Pension Credit meets the symptoms of women's
poverty in old age, but a sustainable solution requires that the
underlying causes are addressed.
2. The current British pension system, including
state and private pensions, is grossly inadequate for most women.
Designed on a post-war male breadwinner and female carer model
it does not meet women's needs or take account of their different
life experiences. We argue therefore that the British pension
system, as well as the Pension Credit, is due for a radical overhaul.
As long as pension acquisition continues to depend on full-time,
continuous, well paid work, it cannot meet the needs of women.
3. Women lose out because:
— 3.1 They spend fewer years in
the labour market and all parts of the pension system reward long
working lives
— 3.2 Many are in part-time employment
in order to meet their various caring commitments thus having
less access to pension schemes, or insufficient earnings to accrue
pensions.
— 3.3 Even when they work full
time, women earn less than men (over their lifetimes women will
earn on average £241 000 less than men)[90]
and all parts of the pension system either operate an earnings
requirement and/or pay out earnings related pensions.
— 3.4 Due to differences in sector
and type of employment women have less access to occupational
schemes whilst these schemes continue to offer the best value
for money second tier provision.
— 3.5 To compound all these problems,
women live longer than men. Sex discrimination in annuity rates,
inadequate incomes for surviving spouses and inadequate inflation
proofing of pensions affect the oldest old the most.
4. There are also problems inherent to the
Pension Credit system that mean it is not even working as an effective
"sticking plaster" for many women.
5. TOO FEW
WOMEN CLAIM
THEIR ENTITLEMENTS
Take up of the Pension Credit is even lower
than for its predecessor the Minimum Income Guarantee at under
50%,[91]
leaving many poor pensioners living in poverty.
The pension credit adds an additional layer
of complexity to what is already a confusing and off-putting framework
of pension provision in the UK. This complexity, coupled with
the stigma attached to means-tested benefits, particularly among
older generations, means that take up is low.
6. WOMEN'S
ENTITLEMENT IS
LOWER BECAUSE
THEY ARE
POOR
The Savings Credit element of the Pension Credit
is not working for women. Women cannot benefit from a reward to
savings that they are unable to accumulate in the first place
due to their lower lifetime earnings and a pension system that
does not meet their needs. Therefore men benefit from the Pension
Credit more than women despite already receiving a higher income
in retirement. DWP data shows that despite being the majority
of claimants, women get paid less Pension Credit across all age
groups.[92]
7. PENSION CREDIT
DOES NOT
ACT AS
A REWARD
TO WOMEN'S
INDIVIDUAL SAVING
As the Pension Credit is assessed on a household
basis it does not act as a reward to individual savings. This
system will not encourage women to make their own savings for
retirement as long as their partners are able to make more substantial
savings which tip the balance of household income over the qualifying
limit. Thus women's financial autonomy in retirement is reduced
and they are at risk of poverty upon divorce.
8. These problems inherent to the Pension
Credit system add to the case for more fundamental reform of the
pension system. Fawcett Society, in partnership with Age Concern,
has identified four initial key reforms that will help tackle
the pensions problem for women and we call upon the Work and Pensions
Committee to play a role in making these happen.[93]
— 8.1 Reduce the Lower Earnings
Limit to bring more low-paid workers into the national Insurance
System.
— 8.2 Introduce a fairer, more
accessible system of credits for carers. Home Responsibilities
Protection covers too few women and is confusing and inflexible.
It should be replaced by a weekly credit for all carers that can
be paid into the individual's pension.
— 8.3 Pay pensions to everyone
who pays into the National Insurance System—abolish the
25% rule.
— 8.4 Make second pensions work
for women. The State Second Pension should be made more flexible
to become a better option for women trying to build a second pension.
Fawcett Society
October 2004
90 Women's Incomes over the Lifetime, A Report
to the Women's Unit, Cabinet Office, Ed. Katherine Rake, 2000. Back
91
DWP, May 2004. Back
92
DWP, May 2004. Back
93
One in Four, Fawcett and Age Concern Women's Pensions
report, 2003. Back
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