UK Pensions: Equal Age, Persistent Gender Gap

For decades, a notable disparity existed in the United Kingdom's State Pension age, with women typically retiring earlier than men. A historic shift occurred on 6 November 2018, when the State Pension age for men and women was officially equalised at 65. This landmark day marked the culmination of a process initiated by legislation in the 1990s, aiming to bring an end to a long-standing difference. However, despite this apparent step towards fairness, the reality for many women is far from equal. The equalisation of pension ages has not translated into pension equality, and a significant gender pension gap continues to leave women at a higher risk of poverty in later life, particularly given their longer average life expectancy.

This article delves into the journey towards State Pension age equalisation, the controversies it sparked, and, crucially, the deep-seated reasons why women continue to face disadvantages across State, Workplace, and Private pensions. Understanding these inequalities is the first step towards advocating for a truly equitable retirement future for all.

The Path to Equal State Pension Age

The origins of different State Pension ages for men and women date back to the Old Age and Widows’ Pension Act 1940, which lowered women's State Pension age from 65 to 60. This was justified by the social conditions of the time. However, as societal roles evolved and life expectancies increased, the rationale for this disparity diminished.

Plans to equalise the State Pension age were first announced in the 1993 Budget. The Pensions Act 1995 legislated that women's State Pension age would gradually increase from 60 to 65 between April 2010 and April 2020. This process was, however, accelerated by the Pension Act 2011, which mandated that women's State Pension age would reach 65 by 2018, two years earlier than originally planned. From December 2018, the State Pension age began to rise further for both genders, reaching 66 by October 2020. Future increases are also planned, with the age set to rise to 67 from 2026 and to 68 from 2037.

The WASPI Campaign and Its Impact

The accelerated changes to the State Pension age caused significant hardship and controversy, particularly for women born in the 1950s. Many women, who had expected to retire at 60, found their retirement age pushed back by several years with insufficient notice. This led to the formation of the Women Against State Pension Inequality (WASPI) campaign group, which has tirelessly called on the government to compensate those affected, arguing they were not given adequate time to prepare for such a significant change. While the High Court has ruled that the equalisation legislation was not discriminatory and that the adequacy of notice was not a matter for the courts, the WASPI campaign continues to highlight the profound impact on women's financial planning and well-being.

The Persistent Gender Pension Gap: Ten Key Reasons Women Lose Out

Despite the equalisation of State Pension ages, women consistently receive lower pensions than men. This gender pension gap leaves them more vulnerable to poverty in later life. Here are ten top reasons why women continue to lose out in pensions:

1. State Pension Age Increased More for Women at Shorter Notice

The government increased the State Pension age for older women by up to 18 months with only five years' notice. In contrast, men generally received at least seven years' notice for a 12-month rise. This short notice caused considerable hardship, as many women were unaware of the original plans to increase their pension age from 60, leaving them insufficient time to adjust their retirement plans or build up private pensions.

• Potential Policy Remedy: The Government should consider making payments to women facing hardship due to these changes. DWP could also explore allowing early access to State Pension if needed for those significantly affected.

2. State Pension Triple Lock Does Not Cover Pension Credit

The much-publicised State Pension 'triple lock' ensures that State Pensions increase by the best of price inflation, earnings inflation, or 2.5%. However, this protection does not extend to Pension Credit, a means-tested benefit designed to lift the poorest pensioners out of poverty. More than half a million over 80s, predominantly single women, rely on Pension Credit, which is only tied to earnings, unlike the triple-locked new State Pension. This disproportionately affects the poorest and oldest women pensioners.

• Potential Policy Remedy: Ensure Pension Credit is protected in the same way as State Pensions, providing a fairer safety net for the most vulnerable.

3. Very Lowest Earners (Mostly Women) Excluded from National Insurance State Pension

Tens of thousands of working women do not receive any credit towards their State Pension. Those earning below the Lower Earnings Threshold (currently £6,032 per job) receive no National Insurance credits for their State Pension, even if they work multiple jobs that individually fall below this threshold but collectively exceed it. If they didn't work, or earned above the threshold, they would still accrue a year of State Pension without paying National Insurance. This inflexibility disproportionately affects women, who are more likely to be in multiple low-paid, part-time roles.

• Potential Policy Remedy: The Government should reduce or abolish the Lower Earnings Threshold and allow all workers with multiple jobs to claim credit for State Pension regardless of earnings in each individual job.

4. Women Who Don’t Claim Child Benefit Lose State Pension Entitlement

Families where one partner earns over £60,000 are not eligible for Child Benefit. However, mothers must still claim it, even if they know they won't receive the payment. If they fail to claim this benefit, they lose that year of State Pension credit, and crucially, they cannot backdate it if they discover this issue later. This penalises mothers who are either unaware of this rule or choose not to claim a benefit they know they won't receive.

• Potential Policy Remedy: Ensure all women looking after children can claim credit for State Pension, irrespective of Child Benefit claims, and allow for backdating of any such claims.

5. Women Have Lower Lifetime Earnings and Therefore Lower Workplace Pensions

As primary carers for both children and adult loved ones, women typically work fewer years, take career breaks, and earn less than men. Lower lifetime earnings directly translate into significantly lower private and workplace pensions. Historically, women were also often forced to leave company pensions if they married or worked part-time, and they tended to be employed in sectors where employer pensions were less prevalent.

• Potential Policy Remedy: Help women retain pension membership during maternity leave or childcare, and encourage employers or partners to contribute to their pensions during these periods.

6. Auto-Enrolment Excludes Part-Timers Earning Below £10,000 a Year

Even the relatively new auto-enrolment programme, designed to ensure all employers provide workplace pensions, leaves out millions of women. Anyone earning less than £10,000 a year (a demographic predominantly made up of women) is not automatically enrolled into a pension scheme and therefore misses out on employer contributions. If they hold multiple part-time jobs, each paying below £10,000, they are entirely excluded from the auto-enrolment system's benefits, missing the 'behavioural nudges' that have successfully widened pension coverage.

• Potential Policy Solution: Remove the £10,000 earnings limit for auto-enrolment to ensure broader coverage for low-income workers.

7. Low Earners (Mostly Women) Often Pay 25% Extra for Their Workplace Pension

Those earning between £10,000 and £11,850 who are auto-enrolled into their employer's pension scheme can unknowingly pay 25% too much for their pension. This affects more women than men. If an employer uses a 'Net Pay' basis pension scheme, low earners do not receive the tax relief they would get in a different scheme type, effectively paying more to their pension provider. This is a significant injustice, as low-earning women, who need the most assistance in building their pensions, are forced to pay a higher effective rate without their knowledge.

• Potential Policy Solution: Ban pension providers and employers from placing workers into pension schemes where they will not receive the full 25% tax bonus.

8. Occupational Pensions May Not Aggregate Women’s Pension Service After Maternity

Women in final-salary pension schemes who take time off to have children and then return to work often find themselves at a disadvantage compared to men with uninterrupted careers. Some pension schemes fail to merge periods of pension service, leading to significantly lower pensions for these women upon retirement.

• Potential Policy Solution: Encourage pension trustees to allow women’s pension rights to be preserved and aggregated during caring responsibilities.

9. Many Men Buy Single Life Annuities That Don’t Provide for Their Widow

In Defined Contribution pensions, past rules encouraged men to buy single-life annuities, often advised to 'shop around for the best rate.' These annuities provide no cover for a spouse, leaving women with no private pension income if they are widowed. This can lead to severe financial hardship for surviving partners.

• Potential Policy Solution: Automatically enrol everyone looking to take money out of their pension or buy an annuity into free PensionWise guidance to ensure they understand the risks and complexities, ideally encouraging more to seek professional financial advice.

10. Women’s Pensions Are Not Properly Protected on Divorce

While the law allows pensions to be shared upon divorce, many women fail to factor this into their settlement, thereby losing out significantly in retirement. Even with agreed pension-sharing orders, new pension freedom rules can put divorced women's pensions at risk. Pension trustees are not always obliged to get consent from the former partner to a pension-sharing order before transferring a final salary-type pension. This means former husbands could potentially transfer money out of a Defined Contribution pension or a final salary-type pension without their ex-wife's knowledge, leaving her without her rightful share.

• Potential Policy Solution: Ensure that all women with pension sharing orders must give formal approval before former husbands can transfer or withdraw money from their pension.

Understanding Your State Pension

The State Pension is a weekly payment from the government, available once you reach State Pension age. To qualify, you need to make National Insurance contributions. For the full new State Pension, you generally need 35 qualifying years of contributions, with a minimum of 10 years to receive any payment. For those who reached State Pension age before the new system, 30 years of contributions were needed for the full basic State Pension.

The State Pension is protected by the 'triple lock guarantee,' meaning it increases annually by the highest of CPI inflation, average earnings growth, or 2.5%. This ensures its value is maintained over time, though as noted, this protection doesn't extend to all forms of pensioner income support.

To check your State Pension forecast, you can use the government's 'Check your state pension' service online or contact the Future Pension Centre of the Department for Work and Pensions (DWP) for a detailed breakdown.

Frequently Asked Questions

Why was the State Pension age equalised?

The equalisation of the State Pension age was primarily driven by several factors: the increasing role of women in the economy, rising life expectancies for both genders, an international trend towards increasing pension ages, and the move by occupational pension schemes to equalise their normal pension age at 65. The aim was also to ensure the long-term affordability of the State Pension system by reducing the 'dependency ratio' – the proportion of the non-working population supported by the working population.

Will the State Pension age increase again?

Yes, the State Pension age is scheduled to increase further. It rose to 66 by October 2020. It is then due to rise to 67 from 2026 and to 68 from 2037. These changes are subject to ongoing review and potential legislative adjustments.

Is equality of pension age discriminatory?

The High Court has ruled that the legislation to equalise the State Pension age between men and women was not discriminatory. In a judgment handed down in October 2019, the High Court determined that successive statutes from 1995 to 2014, which legislated for equalisation, were not discriminatory on grounds of age or sex. The court concluded that the legislation served to equalise a historic asymmetry and was justified by legitimate objectives such as ensuring the affordability of the State Pension regime. The court also stated that it was not its role to determine whether the notice provided to those affected was inadequate.

Conclusion

The equalisation of the State Pension age was a necessary and long-overdue step towards gender parity in retirement. However, as the detailed analysis above reveals, simply aligning the retirement age does not automatically achieve pension equality. The deep-rooted societal and economic factors, combined with specific policy loopholes, continue to create a significant gender pension gap that disproportionately affects women throughout their working lives and into retirement. While women have made immense strides in the workplace, urgent and targeted measures are still needed across State, Workplace, and Private pension systems to truly address these disadvantages and ensure a fair and secure financial future for all.

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