State Pension: Women

Baroness Jenkin of Kennington Excerpts

Thursday 3rd December 2015 Lords Chamber

[Baroness Jenkin of Kennington (Con)]

My Lords, I am extremely grateful to the noble Baroness, Lady Bakewell, for raising this issue—just in the nick of time for me, as it happens, as I have another four days left in my 50s. We can only just scratch the surface of the subject of many women’s perceived and actual financial insecurity, especially as they approach retirement, but this is a very good place to start. Much has been said over recent years about how the financial protection enjoyed by pensioners, despite fiscal consolidation, contrasts a little too sharply with that for young people, as my son, who is in his 20s, reminds me on an almost daily basis. Instead of Britain being “no country for old men”, it should perhaps be described as a pretty good country for old men. Final salary pension schemes, after jobs for life, are now very much consigned to history, but many male baby boomers and their families still benefit—and I do mean old men.

Research from the Centre for the Modern Family, whose support in helping me to prepare for this debate has been much appreciated, shows that women entering retirement seem to be in a very different place. There are cultural reasons for this, and it is not due just to state and other pension arrangements, as I hope to make clear. The Pensions Act 2011, which gradually equalises pensions ages, has affected a significant number of women. DWP figures suggest 2.1 million women will see their state pension age increase by one year or less, with a maximum increase of 18 months. This is, of course, relative to the timetable set by the Pensions Act 1995, which affected a group of women born over a three-year period whose state pension age was set at between 60 and 63. However, all women affected by accelerated equalisation will reach the stated pension age after the introduction of the new state pension, which is more generous for those women who historically did poorly under the current system because of lower average earnings and part-time working.

The 2011 changes responded to increases in life expectancy that were faster than projected, and the price tag for not revising the 1995 timetable was a cool £39 billion. Also, the Institute for Fiscal Studies has shown that the rise in women’s state pension age since 2010 has been accompanied by increases in employment rates for the women affected. Going with the grain of this, the Government have abolished default retirement age for all workers and extended the right to request flexible working to all employees. As we are all too well aware, time sovereignty can be incredibly important to women, perhaps particularly at this stage of life when they may be acting as sandwich carers to grandchildren, disabled adults and often frail elderly parents and relatives. Life may only “work” for them if they have this flexibility, as they often still have an enormous amount to contribute to the labour market but cannot fit that contribution into the traditional nine-to-five slot.

The Centre for the Modern Family research, analysing the changing relationship between the family and the workplace, found that working later is the new norm. Remaining in work past the current state pension age is now an established concept among the general public, but retirement planning is left late. The majority of workers over the age of 55 have either not planned their retirement or wish to continue working. However, there is a big difference between men and women in terms of this latter category; while more than one-third of men—38%—want to carry on working because they like their jobs, barely more than one in 10 women feels this way. Financial education and advice provided through services such as the Money Advice Service and Citizens Advice are crucial to encouraging people to engage with retirement planning. Employers could also play a greater role in advising staff on their pension options, if they do not fall foul of regulations by providing financial advice that they are not qualified to offer. Perhaps the Minister might have some advice on that.

Obviously, the Government must inform recipients of the state pension on when they will be eligible and what they can expect. I think that I am right in saying that letters were sent out from DWP to addresses, current with HMRC at the time, to reach women affected by the 2011 changes at least two years before they reached state pension age—although, as the noble Baroness points out, it has not been by any means perfect. While this advance notice is important, planning and saving for retirement have to start far earlier than research suggests is the current social norm. Scottish Widows, for example, has been studying women’s retirement prospects for over a decade and has consistently found, year on year, that women lag behind men in saving adequately for retirement. While there are a number of reasons for this—and of course the gender pay gap must bear some responsibility—a problem remains specifically with women’s understanding of long-term financial savings products. Again, research shows that 43% of women still say that they have little or no understanding of individual pension savings, while 71% of women do not know what pension pot they will need to secure the retirement income they hope for. Pension providers, employers and individuals themselves all have a role to play to address this issue; it must become the norm for everyone to consider the size of their pension pot and their financial aspirations for retirement at an earlier stage.

This year’s research is beginning to provide some reasons for optimism, as latest figures show that 52% of Britain’s women are now saving adequately for retirement, but projections suggest that many women will not have a comfortable and enjoyable retirement, and may spend their later years worrying about their financial situation. Some 28% of retired women say that the income that they received once retired was less than they had expected, and 25% of females aged 30 to 49 are non-savers, compared to 15% of men. This is not all down to uncertain working patterns; only 19% of women on permanent contracts are now non-savers. However, this number jumps to 35% of self-employed, or women who work freelance. More than half of the UK’s self-employed or freelance working women—56%—are undersaving compared with 45% of those on permanent contracts.

Ultimately, women need to be able to make better informed decisions. Information, whether from the Government, pensions providers or other trusted sources of advice, is indispensable, but many women feel defeated from the outset in understanding what is being given to them in this regard because of their antipathy to financial and, more broadly, mathematical information. I was recently interviewed for a publication called The Fear Factor, which aimed to highlight how otherwise educated women can feel ill equipped, by dint of their sex, to understand maths and money. Poor maths skills and inadequate financial management skills are linked, and women are peculiarly willing to admit to being not just bad at maths but also anxious about figures, and not very good with money. Such attitudes—I am afraid that I am speaking to myself, particularly about maths—need to be challenged.

The Fear Factor project is run by Shirley Conran OBE, who wants to liberate women from these fears in the same way as she aimed to liberate women from housework in the 1980s. She is arguing for a national campaign to expose the maths myth that it is natural for women to be daunted by maths and they need men to manage their money because they lack the necessary maths gene to make sense of it. Ms Conran has been engaging with the Department for Education, as her focus was mainly on young women, but I think that the campaign needs to reach right up into the age range we are discussing today. Will the Minister consider meeting Shirley Conran and her team to discuss how to help women of pensionable age to gain mastery over their fears in this area so that they are able to approach retirement with more confidence and foresight?