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The pensions system needs better representation for women

By Sara Neidle
11 March 2021

By Sara Neidle

Over the past 25 years and more, we have seen a swath of changes to pensions that have impacted women. Some changes better than others, but largely these have arisen from women’s historic and changing role in society and the workplace. Given the nature of pensions policy, being long-term and slow moving, it is constantly playing catch-up.

Changes to the state pension were announced in 1995 to bring the qualifying age for women in line with that for men by 2020. This increase, from 60 to 65, was accelerated in the 2011 Pensions Act. Since November 2018, it has risen for both men and women to 66, and further increases are set to continue. This has meant thousands of women who have already had to wait for their pensions, have to wait even longer.

Then you have the state pension which changed in 2016 to a flat-rate system. This left some better off, but others worse off as they found their retirement income reduced. For example, women can no longer rely on their husband’s National Insurance (NI) record when claiming their pension, and the NI requirements for a full pension has risen from 30 to 35 years’ contribution.

Pension inequality for women is nothing new. Nor should we be surprised following last week’s announcement that thousands of married, widows and retired women have been underpaid their state pension.

It is believed that around 200,000 women have missed out on thousands of pounds of basic state pension. It is understood that this computer glitch was caused by systematic underpayments of their state pension for up to two decades. This issue was brought to light last year by former pension minister Steve Webb, partner at Lane Clark & Peacock revealing these underpayments. Now the Department for Work and Pensions (DWP) has revealed details of the underpayments and estimates it will cost £2.7bn, approximately £13,500 per pensioner owed to fix this issue. There will also be no backdated interest added to the pay-out. Based on this, it is estimated that it will take over five years to sort this mess. Steve Webb has said how that “the government needs to devote serious resources to getting these repayments” sorted. So why is it only now that this have been rectified?

From what I have read there was a “systematic failure” at the DWP that led to this underpayment of women. If you look at the numbers carefully based on what these pensioners received, some may have questioned that they weren’t given their entitlement. Yet, as we are aware pensions administration isn’t so straightforward and there are many technicalities especially around state pension which makes it all the more confusing. It appears that this glitch mostly affected women whose husbands turned 65 years after March 2008, as it was from this date that the DWP was meant to automatically give them a pension based on their husband’s entitlement.  The LCP has built a free tool on its website to help those that have been affected.

It’s hard to believe that no one else knew about this issue. Baroness Ros Altmann, a former pensions minister has called for an investigation into the underpayments. Listening to Baroness Altmann on Radio 4 Women’s Hour last week, she described the computer glitch that caused the underpayment “inexcusable”. Yet again it is another example of pension inequality.

Women Against State Pension Inequality (WASPI), a state pension age campaign group has been calling for many years’ changes to the pensions of women in the 1950s who have been affected by the state pension age changes, to address pension inequality for all women. For women that were already suffering prior to the pandemic, now find themselves in a more challenging situation. WASPI believe that last week’s 2021 Spring Budget was an opportunity to address this, and how they “feel let down, and overlooked”. It is fair to say, that the pensions system and industry needs better female representation to address these on-going issues.

Some could argue that the pandemic has accelerated this inequality for women. There has been plenty of studies that shows the effects of the pandemic are disproportionately affecting women, and in particular women’s finances. Pay inequality is a contributing cause of the gender pension gap which sees women retiring with less money saved over their lifetimes than males. In a recent poll of more than 1,000 UK women by Fidelity, one in four said they had experienced a drop in income over the past 12 months. From that, nearly one-third of those polled said they were saving less and one in eight had cut their pension contributions. Not only that, but mothers in particular, are feeling the mounted pressure from the pandemic, and as a result are considering stepping back or even quit their careers. Of course, I’m not saying this is in all cases, but this sentiment is visible.

These pension inequalities are not going to go away anytime soon, and it’s a matter of time more than anything. This week we celebrated International Women’s Day, but for me personally, I celebrate Women’s Day, every day of the week. Every day we should be recognising the achievements of many extraordinary, dedicated, and hardworking women – whether that be working women, working mums, stay at home mums, single mums, carers and more. We all have a part to play in society, however big or small. Every day is a victory for women.