The Equal Pay Act, which made it illegal to discriminate against women in the workplace, became law in 1975, but there are still inequalities when it comes to women and pension provision.

State pensions

It is estimated that only 30 per cent of women currently retiring have built up an entitlement to a full state pension in their own right, compared with 85 per cent of men.

To be entitled to a full state pension women need 39 ‘qualifying years’. However, provided they have at least ten, they will be entitled to some state pension. (see Guide to state pensions).

A married woman who has not made enough contributions can receive a pension (£54.35 a week in 2008-09) based on her husband’s contributions, but only once he is 65.  If a woman is under 60 this extra amount will be paid to her husband, and is known as the "adult dependency" addition. If such women have an independent income in excess of £60.50 a week in 2008-09 their husbands cannot receive this extra money.

For married women over 60 the extra £54.35 is paid directly to them and is known as a “married woman’s pension” or sometimes a “category B pension”.

Women who have built up an entitlement to some pension in their own right cannot receive the married women’s extra pension as well, but they will be awarded the higher of the two.

Why are women missing out on state pensions?

The reason is that many women have not made enough national insurance contributions, usually because they have taken career breaks to be a full time homemaker, bring up children or care for an elderly relative.  In the case of older married women it may also be because they opted to pay reduced contributions which did not count towards a state pension.

Reduced contributions, sometimes called the ‘married women’s stamp’, were an option until 1977.  Since then it has not been possible for women to start paying these lower contributions, but women who had already started could continue to do so, provided they did not have a break in their employment lasting for two or more complete tax years.

What happens if you stop work to raise a family?

Women who stopped work after 1978 to raise a family (or look after a sick or disabled person) may be entitled to Home Responsibilities Protection (HRP).  This is designed to protect their right to a state pension. 

You may also get HRP for years when you worked for part of a tax year but did not make enough national insurance contributions to make it a ‘qualifying year’.  For each year you are awarded HRP the number of qualifying years needed for a full state pension is correspondingly reduced by one year.  However, HRP cannot be used to reduce the number of qualifying years to below twenty.

Women married before 1977 who retained the right to pay reduced national insurance contributions cannot be awarded HRP.

HRP should be awarded automatically to those who are eligible. To find out if you have been awarded HRP, obtain a pensions forecast on the Pensions Service website

What happens if you are widowed?

If you are widowed and below state pension age, when you retire you may be able to receive a pension based on your late husband’s national insurance contributions if you do not qualify for a full pension in your own right.  The amount you receive will depend on your own and his contributions and the age at which you were widowed.

Women over retirement age when their husband dies who are not already receiving a full state pension can use their late husband’s contribution record to bring their pension up to the full amount for a single person (£90.70 a week in 2008-09.

If your husband dies before state pension age and you are also under 60, you should receive a non-taxable Bereavement Payment of £2,000, provided your husband had made enough national insurance contributions.

If you are at least 45 you should also receive a Bereavement Allowance for 52 weeks.  This is from £27.21 in 2008-9 up to £90.70 a week depending on your age.  You will receive the maximum if you are over 55 and a reduced amount for every year by which you are younger than 55.

If you have dependent children there is also a Widowed Parent’s Allowance for which there is no age restriction.

A widow can also ‘inherit’ 50 per cent of her late husband’s second state pension, built up either through SERPS or S2P. (see Guide to state pensions)
 
Since 2001 men who are widowed are also eligible for these benefits.

What happens if you are divorced?

Divorced women who do not have a full contributions record can use that of their former husband if it will give them a bigger state pension than they are entitled to in their own right.  However, you can only use a former spouse’s contributions made during the period of the marriage, so women may have to start paying contributions after a divorce to protect their right to a full state pension.

Women who divorce after state pension age who have been receiving only the married women’s addition may be able to have this increased to the full amount for a single person using the rules outlined above.

What happens if you re-marry?

If you re-marry before reaching retirement age then your new husband’s national insurance contributions record will replace that of your late or ex-husband as the basis for your pension if you have not made enough contributions yourself. 

If you marry again while in receipt of Bereavement Allowance payment will stop immediately.

Women who re-marry after retirement age will not lose any pension based on a former husband’s contributions.  For this reason, women contemplating remarriage either side of retirement should give due consideration to the wedding date, as it could impact the amount of pension they receive.

Can women make extra contributions to ‘top up’ their state pension?

Women can make voluntary national insurance contributions if they are not going to qualify for a full basic pension in their own right, but careful consideration should be given to whether it is worthwhile. 

Class 3 voluntary contributions are £8.10 a week in 2008-9, women cannot make them for any years in which they paid the married women’s reduced contributions, and you can normally only go back six years to fill in the gaps.

Bear in mind too, that married women can get the additional £54.35 based on their husband’s contributions, and that from April 2010 only 30 qualifying years will be needed for a full state pension (see Future changes, below).

Occupational pensions

An estimated two-thirds of women have no occupational pension to look forward to, for basically the same reasons as why they miss out on full state pensions.

In addition, far more women than men work in part-time or in casual employment.  Although since 1999 the law has stated that part-time employees must be allowed to join an occupational pension scheme, the reality is that if you are only working part-time your earnings will be low. This makes it more difficult to afford the contributions, and even if you do join the scheme your pension when you retire will obviously be lower than if you worked full-time.

Pension sharing on divorce

Women who divorce may be able to gain a pension from their former husband’s company scheme.  “Pension sharing on divorce” works in one of two ways.

Either: part of the pension is “earmarked”, so that when the pension starts being paid it is divided between a divorced pair in the proportion agreed (or imposed by the Courts) at the time of the split.  The drawback of this arrangement is that, if the scheme member dies before retirement age, or the woman remarries, she will lose it. 

Or: a pension is divided at the time of the divorce.  In this case, either the woman will be given separate rights within the company scheme (which the trustees are not obliged to allow), or she may be given a transfer value so that she can start her own pension (see Guide to occupational pensions).

The solicitor handling the divorce will advise you on the best course of action.

The pension sharing options are available to both parties in a divorce, so in cases where the woman is the main breadwinner she may have to give some of her pension to her ex-husband. 

Future changes

The Government is aware that single female pensioners are among the poorest people in society and has announced future reforms to improve their lot. 

Women retiring on or after 6 April 2010 will need only 30 qualifying years of national insurance contributions to be entitled to a full state pension in their own right. 

A new Carer’s Credit will give national insurance credits to women (or men) who stay at home to carry out caring duties, and the number of hours you must spend a week doing this will be cut from 35 to 20.

To finance these changes women will have to work for longer, as state pension age will rise incrementally from 60 to 65 by 2020.  Women born before April 1950 will still retire at 60, but for women born after this, one month will be added to their retirement age for every month their birth date falls after 5th April 1950.  All women born after 5th April 1955 will thus retire at 65 to be equal with men.

In the coming years, as more and more women work, and those who paid reduced national insurance contributions drop out of the equation, the proportion of women entitled to a full state pension in their own right will increase. 

It is estimated that by 2010 three-quarters or women will qualify and by 2025 the figure will be 90 per cent.

CashQuestions Guide to State Pensions
CashQuestions Guide to Occupational Pensions

CashQuestions Guide to Private Pensions

CashQuestions Guide to Pensions for Women
CashQuestions Guide to Annuities

CashQuestions Guide to Drawdown

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