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Monday, 2 November 2015

WOMEN WILL GET LESS THAN MEN FROM THE NEW STATE PENSION

Fewer than one in four women who qualify for the new state pension in 2016/17 will get the full amount. Right up to 2054 fewer women than men will qualify for the full standard pension.  
  
Year one 2016/17
The new DWP figures show that out of 90,000 women reaching state pension age in 2016/17 only 20,000 (22%) will get the full new state pension or more. The full rate will be £155.65 a week. However, more than three out of four women will get less. Out of the 70,000 who do so, 40,000 will get the same as they would have got under the old state pension scheme – which by then will be £119.30 a week.

The figures are better for men. Out of 320,000 reaching State Pension Age in 2016/17, half (160,000) will get the full new state pension or more. Almost all of the other half – 140,000 out of 160,000 – will get the same pension they would have got under the old system.

Combining men and women for 2016/17 a total of 410,000 people will reach state pension age. Out of those 230,000 – more than half (56%) – will get less than the full amount of the pension. And the great majority of them – 180,000 (78%) – will get exactly the same pension they would have got under the old system.

The first five years
In the first five years of the scheme, 2016/17 to 2020/21, 690,000 women will reach state pension age but only 280,000 (41%) will get the full new State Pension or more. And 410,000 – about six out of ten (59%) – will get less. More than a third of those who get less will have their pension reduced because they have fewer than the 35 years of National Insurance contributions needed to get a full one. Nearly three quarters will have their pension cut because they paid into a pension at work. Some, of course, lose through both reasons. More details below under Causes.

This group are the WASPI women - named after their organisation Women Against State Pension Inequality - who campaign for compensation for women whose state pension age was raised twice. The most recent increase was announced only in 2011 and added up to 18 months to the state pension age of this group of women and they all got less than ten years' notice of the change.

They were born from 6 April 1953 to 5 April 1955 and will reach State Pension Age from 6 July 2016 to 5 April 2021.

Women born later than that will reach state pension age at 66 adding a year to the five years already planned since 1995. In theory they had at least 10 years notice of the change announced in 2011, though many only learned about it more recently.

For men the figures are 1,300,000 reaching pension age and 610,000 (47%) who get the full new State Pension and just over half (690,000 or 53%) will get less than the full amount.

Over ten years from 2016/17 to 2025/26 the position improves slightly. 63% of men and 55% of women get the full new state pension or more. From 2021/22 half of newly retired women or more will get the full new state pension. By the end of the ten years - those who reach state pension age at 66 in 2025/26 - almost a third (32%) of women and a quarter of men will get less than the full new state pension.

There are more men reaching state pension age in the period because women’s state pension age is being raised at an accelerated rate to equalise it with men's. So each year fewer women reach state pension age as it moves further into the future.

Causes
For the first time the figures allow us to see the numbers of men and women affected by the two reasons which cause so many to get less than the full new state pension.

First, in its early years the new state pension will be reduced for people who were 'contracted out' of State Second Pension and SERPS and paid instead into a private or company pension. Contracting out ended in April 2016. For those who were contracted out an amount is deducted from their entitlement to new State Pension. If that reduces the amount of the new State Pension to less than they would have got under the old system then they get that old pension amount instead. Hence the large number who will get the same or little more than the old pension.

In the first five years of the new scheme 1,020,000 will reach state pension age but get less than the full new pension and 830,000 (81%) will do so partly because of a contracted out deduction. Among men 85% of those getting less are affected by a contracted out deduction. For women - the WASPI group - the figure is 73%.

Second, the new state pension requires 35 years of National Insurance contributions to get a full pension. Since 2010 the old pension only needed 30 years. It will be harder for women than men to achieve this higher number. Missing the 35 year target is at least part of the reason for the reduced pension for one in five men (21%) and more than a third of women (37%) in the first five years of the new state pension - the WASPI women.

Some will have their pension reduced for both reasons About 7% of men and 10% of women lose some pension from both causes.

The longer term
The Department for Work and Pensions has resisted publishing a gender breakdown for the new pension. These new figures, obtained through a Freedom of Information request, not only show major discrimination against women in the early years but show that it will continue as far forward as the figures go – 2054. In the 2030s 15% of men but 19% of women will get less than the full standard new state pension. In the 2050s this settles down to 10% of men and 15% of women. Every year 60,000 women and 40,000 men will get less than the full pension. These are people currently in their late twenties or early thirties.

In those  years the only reason for getting less than the full state pension is failing to have at least 35 years of contributions. That is a condition that women will always find harder to fulfil than men.

No pension
In first five years of new state pension between 45,000 and 60,000 new state pensioners (2% to 3% of the total) will get no state pension due to having fewer than 10 years National Insurance Contributions. Under current rules they would get 1/30th of the pension for each year's contributions. By 2040 it is estimated this rule will be saving £650m a year.

In addition 30,000 to 40,000 people living overseas who reach state pension age in the first five years will be caught by this rule. That is about one in five UK overseas residents who reach state pension age in that time.

These figures from the May 2014 Impact Assessment (para.95) are approximate. 

Further information was given by DWP on 14 January 2016 in Impact of New State Pension (nSP) on an Individual's Pension Entitlement (p.17). It shows that from 2016 to 2050 a total of 110,000 people will have fewer than ten qualifying years of NICs. 30,000 (27%) of them are men and 80,000 (73%) are women. It does not break the numbers down into those in the UK and those living in other countries. The women who are denied a pension will not be entitled to a reduced pension on their spouse's contributions as they would be under the current rules.

SOURCES: The original data is from FOI 2015-4147 and 2015-4344 dated 29 October 2015. The figures provided are estimates based on the DWP’s ‘dynamic forecasting model’ Pensim2 and estimates by the Office for National Statistics of the number of people reaching State Pension Age each year. They take account of the latest laws about when State Pension Age will change. The figures are rounded to the nearest 10,000, which means that numbers and percentages may not add up to 100%. Although they are approximations, they are the best we will have and give a clear indication of the trends and likely outcomes.

You can read the full data here.

19 January 2016
vs. 1.60