September 1997 saw the launch of separate but related initiatives by the UK Government and the Trades Union Congress, aimed at promoting pensions provision for women.
Not long after the Labour Party came to power in May 1997, the Secretary of State for Social Security, Harriet Harman, announced a review of pensions throughout the UK. In July, the minister responsible for pensions, John Denham, who is to head the pension review, invited contributions from groups such as the National Pensioner Convention, the Confederation of British Industry, the Trades Union Congress (TUC) and various pensions industry organisations. As a further stage in the process, in September Ms Harman appointed an independent group of experts to report on the state of pension provision in the UK. The group, which is expected to report some time in February 1998, will advance the review by providing an independent analysis of the current state of provision and of likely future trends. Ms Harman said that one of the fundamental challenges of the pensions review is to narrow the "pensions gap" between men and women. Many pensions are simply not flexible enough to cope with women's working patterns. Women still earn less on average than men and are more likely to take time off to care for their families; as a result, women are more likely to be poor in retirement than men.
At the same time as the Government is reviewing pension provision for women, the TUC has launched a campaign to raise awareness amongst women of the importance of such provision. The TUC's message to women is that it is never too early to start thinking about a pension - and in some cases it may not be too late. The campaign has been backed by women's and equal opportunities organisations. Kamlesh Bahl, chair of the Equal Opportunities Commission, said that: "The pensions systems we have now were designed over 50 years ago and are hopelessly out of date - especially in meeting women's needs. We urgently need a modern pension system which recognises that women combine working and caring. This excellent initiative by the TUC will take us a step closer to that aim."
Pension power
The TUC campaign - Pension power- was a week-long programme, from 22-26 September, seeking to make pensions advice widely available to women of all ages and background. The aim was to focus primarily on women in part-time and temporary work and those who have taken time out of work to look after children, as these are the most vulnerable groups in terms of pension provision. The purpose of the campaign was to:
- inform women about their pension rights;
- emphasise that pensions are an issue for women; and
- tell women that the earlier they start to make plans for retirement, the better off they will be when they retire.
Part of the programme was a free telephone advice line enabling women to call free of charge for expert advice and information about pensions and particular problems that they may be experiencing. In the first five days of the helpline, the TUC recorded 100,000 calls trying to get through, and this prompted it to open the line for an additional week. A report - entitled A rude awakening- which summarises some of the main points from the calls to the helpline, has been published by the TUC. It reveals a "startling lack of awareness" among women of their pension rights. Many women had not made any provisions for themselves and were relying solely on contributions to pensions that their husbands had made. Other key findings are as follows:
- a quarter of calls were from women who did not know whether they were entitled to any state provision;
- 47% of women callers were aged between 45-60, reflecting fear of poverty in retirement; and
- 6% of women callers were seeking advice following divorce. In many cases, reliance on their husband's pension had left them with little or nothing to retire on. Although they are now entitled to claim part of their husband's pension, pensions bodies will have to review how this is to be best achieved.
After such a response to its initiative, the TUC is calling on the Government to open a permanent helpline and advice service for women. General secretary John Monks said: "This line has only touched the tip of the iceberg. The service now needs to be continued on a permanent basis. That is why we are calling on the Government today to establish a freephone telephone advice line. Such a service would be widely welcomed and would be in keeping with the Government's aim of making more people aware of their pensions entitlement."
The TUC stated that it was also disturbed to discover that some employers continue to exclude part-time workers from pension schemes, even though this contravenes European Court of Justice rulings (UK9705130N).
UK pension provision
There are three main types of pension in the UK:
- the state pension. All employees who have paid sufficient National Insurance contributions are entitled to a basic state pension. There is also a SERPS earnings-related additional pension for those who are not members of occupational pension schemes "contracted out" of SERPS, or who have not contracted out into a personal pension scheme (see below). The basic state pension for an individual currently stands at GBP 62.45 per week;
- occupational pension s. Many companies provide occupational pension schemes, providing supplementary pensions on retirement, and the majority of these are contracted out of SERPS; and
- personal pensions. These are individual pension schemes, into which employees may contract out of SERPS. The investment risk lies with the individual concerned. There are concerns over the trustworthiness of these schemes, especially in light of a continuing scandal about the widespread "mis-selling" of personal pensions in the late 1980s.
Why a special campaign for women?
Women have historically missed out on pensions in the UK. This is due in part to their traditional patterns of employment - low-paid, part-time and temporary - as well as discrimination in occupational pension schemes. Traditionally, women have had less of an opportunity to have their own pensions, and pension rules have been based on age-old traditions of the male "breadwinner".
There are nearly 12 million women in work, many of whom are entitled to some form of pension, and the TUC hopes that its campaign may go some way towards enabling women to make provisions for themselves. According to the TUC, only one women in four is a member of an occupational pension scheme, while a recent Department of Social Security survey showed that 2.4 million women have a state retirement income of less than GBP 40 per week.
As women make up more of the workforce and become more financially independent, and as the pension environment rapidly changes, it now becomes more important for women to build up pensions of their own.
In a recent report, Looking forward to retirement?, the TUC has proposed to the Government six key ways of giving women a "fairer deal" on pensions:
- flexibility in occupational schemes, allowing members to pay varying rates of contributions to take into account periods of high earnings and compensate for time out of the labour market;
- allowing unearned income to be used as a source from which pension contributions can be made;
- new forms of pension to help women make provision for their retirement, including "stakeholder pensions" aimed at the low paid and "citizenship pensions" for carers. Stakeholder schemes should also be able to incorporate temporary workers, who at present fall through the "pensions net";
- new forms of state provision for women who do not have the opportunity to contribute to a scheme via their employer. The TUC sees merit in a new state second-tier pension, targeted at the needs of the low paid and those in insecure forms of employment, for whom private provision is uneconomic without state support;
- all workers, regardless of their employment status and hours worked, should have the opportunity to join an occupational pension scheme if one exists where they work; and
- the "discriminatory practice" of integrating occupational schemes with the state pension should be ended - this would have a beneficial effect on the very low paid, the majority of whom are women.
Commentary
Since the Government effectively deregulated the pensions market in 1986, the value of the state pension has fallen. The situation of women further highlights the outdated basis on which pensions are built, and recent scandals concerning personal and occupational pension schemes have also made a complete overhaul of the UK pensions system essential. The 1995 Pension Act, which came into force in April 1997, provided some added security for members of occupational schemes, but there are still large gaps for others. The TUC is currently looking at ways to extend occupational pension schemes, but would also like to see all working people having the right to a decent state pension, plus some provisions made for people outside of the workforce. State provision is made all the more important by the fact that people in part-time or temporary jobs are the least likely to join occupational schemes, even if they have the right to do so. (MW Gilman, IRRU)