Ruth Davidson: The stark moment the state pension gender-gap hit home

A few years ago, I took over my parents’ finances as their advancing Alzheimer’s disease meant they were no longer able to look after money matters themselves. Searching for bank accounts linked to long-lost cards or a decade-old bill found in a pile of paperwork, felt like detective work. Trying to set up proxy banking by internet or app via power of attorney was a rollercoaster when dealing with customer service. It took months, but when finally established, I was able to get a handle across my parents‘ incomings and outgoings for the very first time. Shorts I found something I wasn’t expecting. In my dad’s account, amongst the two small annuities and his private pension income was a payment tagged “DWP” with a few numbers after. Every month, nearly £1,000 was paid in – it turns out to his state pension. Cross checking against my mum’s current and savings account, I saw the same “DWP” income line, but the payment was half the amount. It hadn’t really registered that they might not get the same amount paid each month. We are so used to talking about “the” state pension in this country, that it often seems like a uniform sum, accessed by all when they hit retirement – an automatic entitlement rather than a contributory benefit. My parents had a fairly “traditional” marriage. My dad worked long hours, mostly in manufacturing for companies that exported abroad as well as served a domestic market. He would frequently have to travel overseas with work – on buying missions or to trade fairs or to see distributors. As such, my mum stopped working for a period after my sister and I were born as someone had to be home and my dad was the biggest breadwinner. So I knew my mum hadn’t worked for a period. But I also knew she’d left school at 15 and gone straight into employment meaning there had been over a decade of national insurance payments accrued before her children arrived – and she’d worked on and off after we went to school. It means I hadn’t expected the gap between my parents’ state pension income to be so big. But it turns out my mum is not alone – women who, like her, were born in the 1940s receive a state pension on average 25 per cent less than their male counterparts. The gap is closing – as rule changes allow for NI credits (like those received while claiming child benefits) to account for career breaks for child rearing. But gender equality in the state pension won’t be reached this decade, or the next decade either. And the disparity is even more pronounced when it comes to workplace and private pensions. The overall pensions gap between men and women in the UK sits at around 33 to 37 per cent, meaning women’s private pensions are worth roughly a third less than men’s. But those numbers include women at all ages and stages – including those yet to consider children – and they hide a much bigger chasm. By the time people reach their late fifties and are starting to think about retirement, women hold just over half the the private pension wealth of men. In cash terms, the men in this age bracket hold average private pension pots of around £156,000 compared to £81,000 for women. Women are also far more likely to have no pension wealth altogether – accounting for an overwhelming majority of those entirely without private or workplace provisions. It is not just the pensions gap that is the worry, but also what industry insiders term as “pensions blindness”. Major pensions providers routinely survey their members and have found that up to half have no idea what their spouse or partner has saved in their pension. Not knowing the value of their other half’s private pension pot can result in a false sense of security regarding future living standards. Similarly, many people assume that because they are married, pensions are automatically shared equally if the relationship ends or if one partner passes away. In reality, private and workplace pensions are treated as separate assets – to be fought over during divorce settlements or, in death, relying on nominated beneficiary forms having been filed correctly. The exposure can be huge. The University of Manchester found that in roughly half of UK couples with private pensions, one partner holds more than 90 per cent of the total combined pension wealth -leaving the other partner entirely reliant on informal trust or unaware of how vulnerable their own long-term security is if the relationship breaks down. Ladies, we have come a long way in the workplace. The gender pay gap has shrunk to almost nothing in younger workers. But the motherhood penalty still exists. The pay gap consistently widens for employees aged 40 and older, largely driven by career interruptions, unpaid caring responsibilities, and a lack of flexible senior-level progression. And, as the wage gap widens, so too does the money put aside for retirement. The added irony, of course, is that women are still consistently outliving men. Called the “longevity paradox”, it means that for an equal standard of living, women on average need a larger pension pot, while most have a much smaller one. So it is time to be less British and actually talk about money with our nearest and dearest. The average UK woman will spend over two decades in retirement. The difference between comfort and hardship is proper planning.