The pension poverty trap

Posted on November 30, 2015 by Eleanor McKenzie
Mature women around a table

New research by the Pensions Policy Institute shows that women in work are twice as likely as men to have no pension pot. This announcement made me sit up and take notice, because this is the second occasion in a short space of time that I have heard women and pension poverty mentioned as a burning issue. So, this seemed the perfect opportunity to examine it and share my findings with you.

Women in the demographics

When I look at the demographics for women in the UK who are over 50, I am reminded of a hysterically funny performance at Caesar’s Palace in Las Vegas from the late comedian Alan King that has become known as the “Survived by his Wife” routine. The gentlemen might find it less amusing, but it nevertheless reveals a harsh reality: women live longer than men. In the UK the average female life expectancy is 83 years compared to 79 for men.

According to published statistics, as of September 2015, there are 23.2 million people in the UK aged 50+. Indeed, there are more people aged 60 and over in the population than there are people aged under-18. Over one-third of the people over 65 live alone and 70% of them are women: that percentage increases as the population ages. What seems apparent is that the UK is set to have an older population dominated by women, many of whom face financial problems.

The Workplace Pension problem

One of the issues is the emergence of the Workplace Pension scheme, which employers must participate in by 2017. Mature Times reports that one-third of women in work won’t qualify for “automatic enrolment into a workplace pension.” This leaves these women at risk of not having an income they can live on in retirement. Yes, there are men who won’t qualify for a workplace pension enrolment either, but it is 16% of them, which is rather lower than the figure for women.

Overall, 25% of workers won’t qualify for enrolment and over half of these won’t meet the criteria because they earn less than £10,000 per annum. Low earnings have been the predicament of women workers for a very long time. The other groups who will suffer under this schemes are disabled employees, ethnic minorities, anyone receiving a Carer’s Allowance, those with more than one part-time job and people working in service industries. One begins to wonder who will actually receive this Workplace Pension?

Mature woman smiling

What needs to be done!

Age UK is one organisation campaigning on this issue and it says: “While automatic enrolment has so far been a resounding success at engaging more people in pension saving, the figures show that many lower earners are being excluded from workplace pensions. We would like to see the auto-enrolment threshold lowered, so more people can enjoy a better standard of living in retirement.”

This sentiment is echoed by Daniela Silcock, the Head of Research at the Pensions Policy Unit, who is quoted as saying: “This research highlights that while automatic enrolment is helping many lower paid people to save in a workplace pension; employed people from disadvantaged groups are disproportionately likely to be ineligible.”

The upside is that at least the problem is already clearly identified.

The Pension Poverty Campaign

Age-related charities are seeking government action over the next five years and ask for pensioner poverty to be halved by 2020 and the proportion of workers paying into a private pension – through the workplace pension – increased by one third.

They also ask for reforms to pension tax relief for low earners, who tend to be women, the self–employed and workers from ethnic minority groups. Otherwise, as this report from earlier in 2015 shows, 100,000 retirees per annum face living the rest of their lives in poverty. Women are twice as likely as men to only have the State Pension to live on. Steve Wilkie of retirement specialists Responsible Life says: “There’s a retirement time-bomb ticking but no one has worked out how to turn it off.”

While they do, this guide to workplace pensions from The Pensions Advisory Service provides useful information on the criteria for automatic enrolment, and Sarah Pennells of has a number of useful tips about actions you can take if you don’t meet them.

For example, if you have two part-time jobs and your total income is more than £10,000, you don’t automatically qualify for a workplace pension, even though the threshold criteria for income from one job is £10,000. She says that you should ask the employer you earn most from to enrol you in their pension scheme and that he/she must pay something for you if you’re earning in excess of £5,824.

So, it seems that there aren’t many answers for women already on the brink of pensionable age. It would seem our best solutions are to support Age UK’s campaign to end pension poverty for both men and women, and to teach our daughters about pension pitfalls and try to make sure they don’t fall into the female pension poverty trap that so many of our generation are facing. As they say “forewarned is forearmed!”

by Eleanor McKenzie

Eleanor McKenzie is a Northern Irish writer with a passion for art, literature, and red wine. She's worked at advertising agency JWT, edited a journal for a European social policy think tank and tried to teach teenagers the difference between "there" and "their". Being 50+ has not significantly changed Eleanor's life, although she finds it a handy excuse when she wants to avoid anything too energetic.