Calls for universal state pension

Calls for universal state pension

A former government minister today called for the introduction of a universal basic state pension to make the system fairer for women.

A government report published two weeks ago revealed that just 30% of women are entitled to a full state pension when they retire, with 2.2 million not accruing a basic state pension because they do not earn enough or have had gaps in their working life.

Speaking at the National Association of Pension Funds (NAPF) autumn conference in London, Baroness Hollis of Heigham, a former work and pensions minister in the Lords, said reform of women's pensions must start with the introduction of a universal basic state pension.

She said problems had arisen because for too long pensions had been designed by men in full-time work for men in full-time work. As a result the years of unpaid, low paid and part-time work women were doing was going unrecognised.

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She said: "We have set it up so that what the state wants from women, working full time, is at odds with what society needs from women, working part-time.

"What is economically rational for a woman - working full time, is at odds with what she and her family know is right - working part-time."

Baroness Hollis said there was a need for more fairness in the current pension system with common entitlement to a full basic state pension, so that women's unpaid work was as valued as their paid work.

At the same time she said, the system needed simplifying, as currently the impact of benefits available to carers was not known until they retired, making it difficult to plan ahead.

She added that there was also a need for greater inclusivity as 20% of women were currently outside of the state pension system.

Baroness Hollis said a universal state pension should be introduced from 2010, with a possible move to a citizen's pension by 2020.

A number of commentators, including the NAPF, have called for the introduction of a citizens pension which would pay a flat rate of £109 a week to everybody, based on UK residency rather than how many years the claimant has worked for.

Baroness Hollis added that occupational schemes also needed to work better for women.

She said currently a woman with a basic state pension of £50 a week and an occupational pension of £30 a week would be no better off than if she had not saved towards her retirement through a workplace scheme at all.

The call for a citizen's pension was backed by Alison O'Connell of the Pensions Policy Institute.

She disputed claims by the government that women would have the same basic state pension entitlement as men by 2025.

She said she could not see how this would be the case, adding that by then the basic state pension was only likely to be worth around 10% of average earnings, so it would not be much of a victory.

The Pensions Commission is expected to make recommendations on how the pensions system can be made fairer to women when it reports on November 30.

Details of the report leaked today made mention of a increase in the state pension, but there was nothing on how entitlements to the state pension will be calculated.

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