PENSIONS
What are the issues women face with their state pension?
Henry Tapper, chief executive officer for AgeWage, discusses an area that has recently attracted considerable media attention – the state pension
T he state pension is important to almost all of us. Only a few workers in the UK won’t qualify for it, and most people would welcome the full single person’s payment of £179.60 a week. According to the Office of National Statistics, it makes up more than half of the income men get in retirement, for women (who get less in private pensions) – it’s even more important, averaging over 60% of their retirement income. It’s currently paid at 66 for men and women, and this will increase to 67 between 2026 and 2028, with a further rise to 68 due between 2044 and 2046. The Department for Work and Pensions (DWP) has commissioned a review, which considered bringing forward a gradual rise to 68 between 2037 and 2039. And it’s most important of all to those on low earnings, as it is now paid out at a flat rate. The earnings-related element of the state pension is still being paid to pensioners who retired before April 2016. The impacts on women These changes in the state pension have created a lot of heartache for women of a certain age, who have seen their retirement age increase from 60 to 66 at a rapid pace. The grievance of Women Against State Pension Inequality (WASPI) is that they are being levelled down to male rates and the changes weren’t properly explained to them. It’s not just the WASPI women who feel aggrieved. The DWP has admitted to serious errors in the administration of payment to widows, married women and the over-eighties, and there are now calls for divorced women to have their benefits reviewed. Former pensions minister, Sir Steve Webb, has set up a benefit checker for women born before 1953 who are receiving less than the full married women’s pension of £82.45 per week.
The state pension is also the subject of attention because of the Treasury’s decision to limit increases this year to inflation. This means the ‘triple lock’ isn’t being applied to pension increases. With the latest rate of inflation running at 5.1%, this represents a substantial cut in the state pension’s buying power. The state pension is also the subject of attention because of the Treasury’s decision to limit increases this year to inflation Ironically, until recently, the state pension was reckoned to be reducing the pensions gender gap. But prompted by pre-Brexit European Union legislation, the government was required to equalise state pension ages. Women can at least comfort themselves in knowing they live on average to 84 while men live on average to 80, so women, if they get their full state entitlement, will expect to receive thousands more in today’s terms from the state. But there is a big ‘if’ in that final sentence. Not everyone will get the full amount, as many will only be entitled to a reduced pension based on the number of qualifying years they have earned during their careers. The rules around ‘qualifying’ are too complicated to cover in this article. The magic number in the future will be 35, but there are some wrinkles. Mothers need to know that, even when one parent earns over £60,000 a year and it’s not in the family’s interest to receive child
benefits, they should register the benefit before opting out of payments. Otherwise, they won’t receive credits towards the state pension. The problems for women of entitlement to state pensions go back a lot further than the changes in child benefits. The reduced rate of National Insurance (NI), available to women prior to 1977, meant that many women swapped lower NI payments for qualifying years towards the state pension. While most women now pay equal rates, some opted in to remain paying less and may find themselves without even the minimum ten qualifying years required to pick up any state pension. Checking tools Having read this tale of woe, female readers may feel the system is stacked against them. Even with their biological advantage of increased life-expectancy, most women retiring today will struggle to get their full state pension. It is possible to check NI records at http://ow.ly/PmLc30s6xnP, which will highlight where any missing years are and advise if it is possible to pay voluntary contributions to fill any gaps (and how much this will cost). A state pension forecast can be obtained at http://ow.ly/ycAM30s6xo6. This service can’t be used if you’re already getting your state pension, but the state pension service can be contacted for anything from notification of a change of address to making a complaint. Information on how to get in touch can be found here: http://ow.ly/ qEQL30s6xoO. As a result of all the problems besetting the state pension, the DWP is employing between 500 and 700 staff just on restitution, so there’s never been a better time to check your benefits. n
What are your views on this topic? Get in touch with us, at policy@cipp.org.uk .
| Professional in Payroll, Pensions and Reward | February 2022 | Issue 77 34
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