Mike O’Brien, minister for pension reform, describes why the Government’s Pensions Bill is good news for women. What do you think?
The gap in pension income between men and women has long been recognised as a problem and we need to do more to fix it.
The figures are stark. In the private sector, only 39percent of women of working age contribute to an occupational or personal pension compared with 45percent of men.
Male pensioners receive on average £80 per week in private pension income and £242 in overall income, whereas single female pensioners receive on average £53 per week from private pension income and £211 in overall income.
This gross inequality is why the Government set about transforming the pensions system – so both men and women can look forward to a better, fairer retirement.
A major factor in our reforms is the introduction of automatic enrolment into an existing good quality workplace scheme or a new personal account.
Part of the Pensions Bill 2007 introduced into the House of Commons earlier this month, some 3.5 million to 4 million women could end up saving for retirement as a result. They will receive access to a good quality scheme with contributions from their employer and further help from the Government in the form of tax relief.
For many, this will be the first time they have had the opportunity to build up an occupational pension.
Women are more likely to be lower earners and to work for small firms, two groups that are not currently served well by the pensions market, groups we want to target with personal accounts. Women are also more likely have a broken work history, meaning they tend to move between jobs more often than men.
While most people agree with the principles behind our reforms, what most women want to know is how much better off they will be.
Thanks to lower charges and the employer contribution, a woman earning around £19,240 a year from the age of 25 to when she retires at 68 could be £2,650 a year better off in retirement than if she was just claiming the reformed State Pension. And a woman who takes a long career break to bring up children could still be around £620 a year better off than if she was claiming the reformed State Pension alone.
These proposals to automatically enrol employees into workplace schemes build on the measures to reform the State pension system.
We are raising State Pension age, bringing back the link between the Basic State Pension and average earnings and reducing the number of qualifying years required for full entitlement to a Basic State Pension to just 30, and making State Pension provision fairer for women and for carers by recognising their social contribution.
Around 35 per cent of women reaching State Pension age currently receive a full Basic State Pension compared with around 85 per cent of men. Thanks to our new measures, around three-quarters of women reaching State Pension age in 2010 will be entitled to a full Basic State Pension, rising to more than 90 percent in 2025.
Overall, these reforms to both private and State pensions will go a long way to creating equality for men and women – giving both equality of outcome and equality of opportunity. They are a significant and long-awaited step forward for women across the UK.
Mike O’Brien is minister for pension reform
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