Paul Lewis Money Talks

Our state pension is sexist: it’s funded by taking money away from hard-working and poorer women. We need to change it

For the past six years there have been two state pensions – the “new state pension” and the older “retirement pension”. The difference between the two? Well, the older one is £42 a week lower, and from April that difference will rise to £43.30 a week – more than £ 2,250 a year. Younger pensioners get nearly a third more than older ones.

If you reached state pension age before April 6 2016 you get the old one. And this lower payment is one of many injustices that lurk beneath the surface of our supposedly generous benefit.

There is also a two- year age gap between the men and women who get the new pension. Men had to be born on or after April 6 1951 to qualify. But women only qualify if they were born two years later. This clear sex discrimination is legal because women’s state pension age was rising month by month from 60 to equal men’s, which then was 65. As that journey took many years, in 2016 the women’s state pension age was around 63 while men’s was still 65.

It was introduced to rid the system of dozens of complexities – many of which were based on different treatment of men and women. But those differences benefited women. Under the old system, married, widowed or divorced women could get a pension based on

their husband’s National Insurance contributions, if that was better than their own. Under the new system, they are on their own.

People whose pension is below the full rate can get a means-tested top-up called pension credit. But that has been cut by more than £14 a week, shifting the poverty line for pensioners. Since 2019 if one member of a couple is over pension age but the other under, they cannot claim pension credit. The Government has said that the younger one – usually a woman – should work.

The new pension also shifted the goal posts. People only needed 30 years of NICs to get a full state pension, and

even those with just one year would get something. However now the minimum number of contributions is 35 years, and you need 10 to receive anything at all. Rules that – again – disproportionately affect women, who are more likely to have fewer years in the workforce or earn too little to pay National Insurance.

The old state pension is currently £ 137.60 a week but very few people get that exact amount. On top of the basic payout, there will be a small amount of graduated pension earned between 1961 and 1975. There is also often a large addition, better known as the “State Earnings-Related Pension Scheme” or Serps, earned from April 1978. In 2020 the average amount added was £38 a week, bringing the old pension close to the new one.

In effect, the new state pension was a buyout – a bigger standard pension in exchange for the extras paid to some. Then pension minister Liberal Democrat Sir Steve Webb won the argument because, in the long run, the new state pension would cost less. In other words, pensioners, and mainly women, will be poorer. The big discrimination against women was the way state pension age was raised from 60 to 65 and then to 66 – in some cases with just two and a half years’ notice.

In 2013, George Osborne, the Chancellor, said the plan to raise the pension age to 66 and then 67 “probably saved more money than anything else we’ve done”. That cash came from hundreds of thousands of women, some of whom lost six years’ pension worth tens of thousands of pounds. They are still waiting for compensation.

This lower payment is one of many injustices that lurk beneath the surface of this benefit