Vera Baird

Labour Party | Redcar

Westminster Hall Debate: Women and pensions

Vera Baird (Redcar): A subtitle for a debate on women and pensions might well be, "A Tale of Poverty and Inequity". As many as 46 per cent. of single female pensioners now live in poverty. I do not feel very happy about the fact that, in the early part of a new century, almost half of single female pensioners are in such a state, but poverty there is. Another 31 per cent. of single elderly women—I assume that that figure is additional, but I am happy to be corrected—are in danger of falling into poverty compared with 25 per cent. of elderly men.

The average single female pensioner has £153 a week; the average man has £194. For couples, the average man gets £248, and the average woman gets £96. The debate is about inequity, not inequality. The situation is particularly harsh in that women make up the majority of pensioners—almost two thirds of pensioners, about 7 million, are women. More women pensioners than men live on their own and therefore have to manage their households out of reduced and limited earnings and 70 per cent. of female pensioners have no private pension. Before I weary the House with more statistics, I shall pick out the last and the first figures: 70 per cent. of women pensioners have no private pension and 46 per cent. of single women pensioners live in poverty. What does that say about the adequacy of state provision for women pensioners?

There are of course cultural and historic reasons why women pensioners are poor. The lifetime model for the generation of women now in retirement would have been to leave school, work for a few years and then marry, stop work, make a home and, usually, raise children. However, not all women wanted to stop work on marriage. Lest anyone should think that by following the cultural norm, those women are reaping their current poverty from having led pleasurable lives of economic inactivity, I shall mention two factors. First, I doubt whether anyone nowadays is prepared to say that caring for a partner and family, particularly and exclusively in the absence of any other role or identity, is either easy or, in a modern sense, fulfilling. Secondly, in many cases it was compulsory for women to leave work not on having children but on getting married. My mother in law had to give up her job as a civil servant not when she became pregnant but on her marriage. I assume that in the post-war era it was regarded as important to preserve jobs for men. Whatever the cultural norm, however, some women simply did not have a choice.

The present generation of pensioners is reaping the result. As women have participated less in the labour market, they have built up less state income in their own right. Until 1978, even when they were working, women usually paid the reduced rate of national insurance—the women's contribution. They never became entitled to a pension in their own right, but depended instead on a category B state pension—a maximum of 60 per cent. of the full rate. That would be calculated on the husband's contributions, which may or may not have been sufficient. Women's more limited participation in the labour market of course meant lower rates of pay. They either withdrew or worked part-time when they had their children, and part-time rates of pay are lower. Very few women in the generation that is receiving pensions had the opportunity to invest in private pension provision to supplement state provision.

In 1978, there was a helpful change and home responsibilities protection was introduced. It reduced the number of years needed to qualify for the state pension for every year—up to a maximum of 19—that a person looked after children. One can now qualify for a basic state pension after just 20, not 39 years of work.

In the Social Security Pensions Act 1975, Barbara Castle abolished the married woman's option, although she allowed those who had taken it to retain it. In 1975, she called the option the "alibi" for the inferior treatment of women. Ever since, however, the terms of the partial abolition and retention of the married woman's option have remained a source of great contention between older women and the Government. Its removal was not the unalloyed benefit that Barbara Castle—that truly great pioneer of women's equality—intended it to be.

Eileen, my caseworker in Redcar, is highly articulate and very skilled and she is a case in point. She started work 36 years ago and was told, "You don't need to pay. Your husband's payment will cover you." She told me, "In those days, husbands told wives what was good for them and so did bosses." The chances are—this is certainly true in Eileen's case—that women thought that the man's stamp was for both of them and that it would be silly to pay more. It is eminently believable that that would be the view. However, as Eileen put it to me, women were not covered as adequately.

Eileen opted for the small stamp. In 1989, she took the option to change over, but she has not accumulated enough years to get a proper pension. She worked part-time while her children were young. She never worked less than 20 hours, but she was not allowed to join the company pension scheme, so she lost out there as well. She therefore has no full retirement pension. Her occupational pension is starting to accumulate, but it is severely reduced. She also lost out on home responsibilities protection because her children were born a shade too early for the system to apply. She expects a basic pension of about £30 a week.

We should not rest easy, telling ourselves that these women were simply victims of the bad old days and that we now look at things from a more modern and egalitarian standpoint. We should not simply say that it will not happen again, because women have been given the minimum income guarantee and are supported. As a nation, we treated those women unfairly.

Governments have said that a leaflet was sent out explaining to women that those who did not pay the full stamp would not get any pension, but that is not an adequate response. Everyone understands that women were just starting to emerge into the world of affairs— by which I mean business affairs. They were unlikely to take that information on board. If they did, their husbands would tell them—again understandably, given the culture at the time—"Of course, the Government have to send information out. Some men are villains, but I'll look after you. You're quite safe. There's no point having independent provision."

These women are now likely to be poor and to be on the minimum income guarantee or perhaps pension credit, with its different criteria. They have been left with low incomes by an act of unfairness. The Government should return to the issue when, in pursuit of their Green Paper consultation document, they consider the position of pensioners. They should examine whether it is possible to return to the question of women who paid the small stamp, which was sometimes bigger than the one that would have qualified them for a category A pension. They paid as much as £19 a week for nothing. For instance, a woman who had not paid any stamp would receive a category B pension, based on her husband's national insurance contributions, as would the woman who had paid the £19 stamp.

I invite the Government to consider giving those women, on retirement, some form of accumulation of what they have forgone—whatever proportion it might be practical to disburse in that way. That would help them to remain off state benefit, or less dependent on it, so it would be in the interests of all of us. At the same time it would be fair and would redress a wrong that is harshly felt, particularly in places such as Redcar, for a long time home to heavy manual industry such as steel works, in which gender roles were extremely polarised. Women there were late to emerge in their own right, continuing to be dependent on their men for longer than metropolitan women might have been. They, like my researcher Eileen, now find themselves in a predicament. They were denied financial self-determination in their youth and they were denied it by the culture in their middle lives. If some recompense is not made, they will be denied financial self-determination in their old age and will spend it in pensioner poverty.

Nothing in my contribution is intended to be critical of the Government. They have done an enormous amount, quickly, to pour money into the poorest pensioners, predominantly women. Nevertheless, about 1 million women pensioners are on the MIG. When pension credit comes in, two thirds of those entitled to it are likely to be women, although that is designed for those who are slightly better off than those on whom I have focused. The Government have acted, and they have acted well.

Lynne Jones (Birmingham, Selly Oak): Recalling my hon. and learned Friend's comments about her case worker, who has a small occupational pension, is she not concerned that Eileen will not receive the benefits of pension credit because she does not have a full basic pension?

Vera Baird: I suspect also that because the pension credit is assessed on Eileen's income and that of her husband, she is likely to be outside its limitations. That is another problem with pension credit—the incomes of both parties are aggregated in considering whether they qualify. I thank my hon. Friend for that point. As I said, the difficulty is almost intractable. There are problems with the complexity of forms, although many of those have been substantially tackled. The leader of my pensioners' forum tells me that although the application form is quite a few pages long, it is now just over a third of what it used to be. Many unnecessary questions have been cut out. One cannot fault local authorities, the Government and Labour councillors and MPs who have gone to the trouble of setting up such liaisons to find out what the problems of take-up are.

Limited take-up has more to do with the complexity of the forms and the process than being unable to find the way to one's local post office. Fortunately, the process has become less complex. I suspect that hardest for all Governments to get to grips with is that older people are reluctant to apply for anything that they do not regard as absolutely theirs by right. That is a hopelessly intractable problem. All we can do is improve our literature and our efforts.

Moving on to future women pensioners, I shall quote the Green Paper and raise some concerns about it. It says on page 57:

"Much of the improvement in the pension provision of future female pensioners will come from labour market improvements—higher employment rates and better pay."

I detect a worrying tinge of complacency there. However, the paragraph after that readily concedes

"pension provision will still lag behind that of men for some years."

My concerns are not allayed by the next sentence, however, which states:

"Many of these problems flow in part from a lack of awareness and understanding of the pensions system."

It is not a good idea to blame the victim. Had I done a PhD on "Pension Planning for Women in the 21st Century" it would not be of much use to me if I were one of the 40 per cent. of women who earn less than £100 a week. Let us consider women earners and not women pensioners. Knowing a lot about how pensions work would not be a great deal of use to me if I were one of the 40 per cent. of women who still earn less than £100 a week. Consequently, with the thesis that we will rectify the poverty of women on pensions by gradual trickledown, I have some concerns. I appreciate that the document is a Green Paper and so the Government are open to argument. However, the suggestion that the problems that women face about pensions will decline and eventually disappear in time is a myth. There are still fundamental socio-economic differences between men and women that will impact on their financial provision in retirement for a generation.

Women still suffer from a gender pay gap, which is not really closing. The first reason for that is because there are 1.4 million women who are below the lower earnings limit and are not in the national insurance system at all. There are far more women than men in that position. The Equal Pay Act became law in 1970, some 33 years ago. As the Green Paper says, the real landslide that has taken place since then is that average female pay is no longer two thirds of average male pay but is now four fifths. The average weekly male pay for a full-time worker is £100 more than the average weekly female pay for a full-time worker. Again, that figure is from the Green Paper.

Although we have the highest female participation in the labour market in Europe, only 40 per cent. of it is full-time. When the average male and female wages are compared, taking into account part-timers, the gap is £200. Calculations by the Fawcett Society and the Women's Budget Group clearly show that, at that landslide rate of progress, it will be 75 years before there is anything approaching equal pay between men and women.

There is no doubt that the increase of hourly pay for young women has progressed well; it is now about 95 per cent. of the hourly pay for young men. However, that is not reflected in the incomes of women over 40, which have simply not moved. Between the two—earning reasonably close to what men earn in one's 20s but substantially less per hour in one's 40s—is the second socio-economic difference between men and women that stops women from trickling down to having good pensions, which is the career break. After she has been out of the labour market for a year, the average woman's drop in pay is 16 per cent. That is a wage penalty that is apparently double that to which men in the same situation succumb.

I am again grateful to the Women's Budget Group for calculating that a woman who starts contributing to a pension when she is 25 and takes five years out when she is 30 will have a fund worth 20 per cent. less than it would have been had she worked consistently. If the woman waits until she is 38 before having a child, the reduction is 18 per cent. A woman who does not start paying until she is 30 will build up a fund worth 25 per cent. less at 60 even if she does not have any break at all. Despite the HRP all that time ago in the 1970s being almost fully operative, women who take career breaks still face real problems in saving for their retirement.

Vera Baird: I do not accept that. On what the norm was, I have my informant Eileen, who is my case worker and was my predecessor's case worker too. Over the years, she has dealt with a large number of women who were in exactly the same position that she is and who were of exactly the same understanding, namely that they needed to do more than rely on their husbands for future resources. Although I entirely accept what the hon. Lady said about her state of mind, I simply do not accept that that was widespread.

On future pensioners, the second state pension will be immensely helpful to future women pensioners and will assist carers. I understand that it is passported via child benefit until the youngest child is five. Passported by the presence of an invalidity care allowance, the second state pension will assist 2 million carers, almost all of whom are likely to be women, to accrue some more pension. However, it is a relatively modest step—I think that the fund is £2.3 billion. Although that is progress, it is small progress that will make some difference but not an enormous amount.

I shall quote a few more figures to try to make that point. At present, to avoid making a claim on minimum income guarantee, it will be necessary to have a stakeholder pension—a third party pension income—of about £30 a week. By 2060, that figure will be about £100 a week. Someone who saves from the age of 25 will have to put aside about £22 a week to be able to receive that income. A person who saved for only 20 years of their life before retirement would need to put aside £62 a week to get that level of income. Given the figures on equal pay that I have quoted, it is self-evident that many women will not be able to set aside that amount of money every week. If they have that money at all, they will have far more pressing needs for it and some apprehension about locking it away in a fund that is not easily liquidated if there is further need.

Those figures show how difficult it will be for many women to climb significantly above the minimum income guarantee. They also point to this truth: that unless radical change is made toward pension financing for women—way beyond what I slightly unkindly characterise as the trickle-down theory on page 57 of the Green Paper—women will not in the foreseeable future be able to acquire significant pensions to keep them out of poverty in old age. Again, the Green Paper says that the Government currently finance 60 per cent. and the private sector 40 per cent. of pension provision. However, it is key to switch that ratio around, so I point again to the figures to which I referred and to how difficult that switch-around will make matters for women in low pay.

What is to be done? First, let me excuse myself by saying that the document is a consultation paper and I introduced the debate not because I have cut-and-dried answers to the problem but because I am keen to put forward a few pointers and suggestions and anxious that others should also put forward their pointers. Certain facts seem plain to me. At present, only the state can remove the unpredictability of women's working lives in relation to pension provision. If both current and future generations of women pensioners are to come out of poverty, it is essential that the basic state pension should be improved, for example, by increasing it at least to the current level of means-testing, by linking it to earnings growth and considering raising age-related additions.

Obviously, the remaining gaps in basic state pension coverage must be plugged by changing the eligibility criteria. The system was designed around a post-war breadwinner-dependent model of work, which is in radical need of updating. It does not fit many men's work patterns these days and it certainly does not fit women's. The requirements have now become unrealistic. People are going into education for longer and starting work later. Further minor but important proposals include reconsidering the lower earnings limits. At present, 1.4 million women earn less than £75. At that rate, they will never accrue any NIC credits at all.

Clearly, the number of years of paid employment that is required for entitlement to a full basic state pension should be reduced. I suggest that the definition of "contribution year" could be altered to allow for some sort of aggregation of part-time work into the contribution rate. As I understand it, the Government currently contribute £60 billion to pensions but, in a different sense, they also contribute £20 billion through the tax relaxations available for investors in private pensions. That money could be better used to redress the imbalance in pension provision. I fear that if none of those ideas are taken up and if more radical steps are not taken, in 15 or 20 years, when Eileen is retired on her £30-a-week pension and I have retired on my gold-standard—relatively speaking—parliamentary pension and we tune into the Parliamentary channel to hear someone talking about women and pensions, the appropriate subtitle of the debate will continue to be "A Tale of Women's Poverty and Inequity".