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'Deadly combination' of career breaks and wage gap hit expected payouts
Women planning to retire this year will hang up their boots on just two-thirds the pension of men, new research reveals.
The near 3 million women about to stop work can expect to receive an average total pension – combining state and private contributions – of £13,671, it estimates: £6,642 less than their male counterparts.
A deadly combination of taking a career break to start a family and the historic 17% "wage gap" between men and women for doing the same jobs have badly hit expected pension payouts, the Prudential says.
Nearly a fifth of women now plan to work well beyond the standard age of 60, it adds, to shore up their pension funds.
"It's still a shock to see so many women retiring at such a disadvantage to their male colleagues, says Karin Brown, annuities business director at Prudential. "The gender gap has become so firmly established because women have historically earned less than men, and still earn around 17 per cent less. When women have children, their pension contributions reduce significantly or stop altogether, and their state pensions often take a hit as well."
To shore up their basic state pension entitlement, women can claim what's known as Home Responsibilities Protection (HRP) if they care for a child aged under 16 and receive child benefit. HRP doesn't credit you with National Insurance contributions (NICs); instead it reduces the number of years that you need to have paid contributions to get a state pension.
From 6 April 2010, however, periods for which you have been awarded HRP before this date will be converted to credits instead which will count towards qualification for the state pension.
Alternatively, women can "buy back" missing NICs to be eligible for a full state pension; a rough calculation suggests that every extra year purchased will supplement your annual pension income by £160.
This allows mothers who stayed home to help raise a family to claw back the gaps in NICs that would otherwise lower their entitlement.
This week – the start of the new tax year – saw enormous demand for NIC "buy backs" scupper a government website that allows savers to work out their pension size.
Before Monday 6 April, it would have cost £8.10 to snap up an extra week of NIC – £421.20 for a whole year – yet from the start of the week, this rocketed to £12.05 for each week – £626.60 a year.
The huge price rise is down to new rules that workers will need fewer years' worth of NICs to be eligible for a full basic state pension; from April 2010, men and women need only 30 years instead of 44 and 39 respectively.
Those who applied before 6 April but couldn't get a pension forecast because of the faulty government online service will have a month's grace to buy the extra years; try calling the Pension Service on 0800-731 7898 if you've run into problems.
It is estimated that just a third of women who reach state pension age actually qualify for the full basic state pension.
Women can buy up to six extra NI years but limits apply: you can buy up to six years for any period since 1975 but you must already have accumulated at least 20 years of NICs, and is only applicable to women reaching the state pension age between 6 April 2008 and 5 April 2015.
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