Women left behind in savings race

Over the past generation the position of women in the workplace has changed beyond all recognition. But when you look at the gender divide that still exists in the pension market, you could be forgiven for thinking that Spare Rib simply got chucked on the barbecue.

News last week that the Government has been short-changing half a million women on their state pension, highlights once again the gross inequalities that women face in retirement.

The statistics speak for themselves: women make up about two thirds of the retired population but their average income in retirement is about half that of men. Women earn less then men, so save consummately less into private and company pensions – a problem which is exacerbated by the fact that many women spend years outside of paid employment bringing up children or looking after elderly relatives.

But even when it comes to the state pensions, women get a raw deal compared to men. Only 30 per cent of women reaching retirement are entitled to the full basic state pension, compared to 85 per cent of men; worse still, just half of retired women qualify for any basic state pension at all in their own right.

So it seems particularly cruel that the successive Governments have been underpaying many of these women. The problems have arisen because the Government failed to credit many mothers with a "home responsibilities award" which effectively paid their national insurance contributions in years that they stayed at home to look after children.

Under current rules both men and women need to make national insurance contributions for 39 years to qualify for the full state pension. But from 1978, mothers were able to "top-up" their NI record by claiming this h award instead. Theoretically women could claim this award for 19 years, giving them a far better state pension on retirement.

But at the weekend Mike O’Brien, the minister for pensions admitted that administrative errors meant that some women did not get these awards and were now receiving smaller pensions as a result.

It is thought that all those affected were born before April 5 1950 and are owed an average of £2,000 each. The Government said it is now addressing this issue, and those affected would be offered redress.

But this isn’t the only pension problem facing many women today. Last year it looked as though the Government was going to allow many women with patchy NI records to "buy back" missed years. But this proposal – which would have lifted thousands of women out of poverty in retirement – was dropped, just before Christmas last year.

This means that anyone approaching retirement in the next two years can only pay for any gaps in their working record dating back to 1996; and from April 2009 women will only be able to backdate payments for the previous six years.

This means that those who took time out in the 1970s and 1980s can do little to improve their pension prospects. And it is these women that are fast-heading towards retirement.

From April 6 2010 the pensions landscape will change again – in a bid to improve the financial position of women in retirement.

From this date women – and men – will only need to have paid national insurance for 30 years to gain a full state pension. The home responsibilities protection system is also being reformed – which should make it easier for women to claim this award when they are caring for children or disabled relatives.

Pensions can be complicated, particularly when it comes to calculating your entitlement to the state pension. Any woman retiring before 2010 or shortly afterwards is advised to seek independent help to make sure they maximise their pension income.

The Government has set up a Pensions Advisory Service helpline specifically for women. It can be contacted on 0845 601 2923. There is also an online calculate on the helpline’s website (www.pensionsadvisoryservice.org.uk) which tells women when they will reach their state pension age, and what income they are likely to receive.

This helpline should give you more information on how to get a copy of your NI record and offer advice on whether it makes sense to buy back missing years.

By Emma Simon

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