Mind the state pension gap – latest data shows men still get a better deal than women

Men are still getting a better state pension deal than women – to the tune of almost £29,000 over the course of a typical 20-year retirement – according to research by Which?.

The consumer champion analysed the latest Department for Work & Pensions (DWP) data and found significant disparities persist – with the average man receiving £153.86 a week and the average woman receiving £125.98 a week.

The research did reveal that the situation has improved slightly. In August 2017, the average payment received by women represented 81.9% of that received by men, up from 79.7% in August 2015 and 77.7% in August 2013.

There are 12.9 million people currently getting the state pension – that’s around a quarter of the adult population and how much people receive is strongly influenced by which group they fall into.

The main group of state pensioners is the 8.4 million people who receive basic and additional pension based solely on their own national insurance (NI) contributions.

This group is 59% male and 41% female, with an average weekly payout of £142.22. In many cases women in this group will have a lower pension because they may have taken a break from their career to have children.

Another category is those who have inherited basic and additional pension from a deceased spouse. Within this group are survivors with no entitlement based on a history of making regular NI contributions themselves – getting £145.12 a week on average.

A further group are able to top up their own pensions using their deceased spouse’s NI contributions – receiving £174.10 a week.

These two categories include 99.7% and 84.0% women respectively – amounting to 2.4 million people overall.

The final groups include people with either no entitlement themselves, receiving an average of £62.97 a week, or who have a top-up on their own pension, getting £76.88 a week, both based on a living spouse’s NI record. These groups comprise 1.4 million retirees and are again almost exclusively women.

Which? also identified that if you are getting your pension under the old system (which existed until April 2016) you could be worse off compared with new recipients.

Those who have qualified since the new system was introduced receive an average of £150.35 per week compared with £137.81 under the old one. This works out at a difference of £12.54 every week and adds up to £13,041 over a 20-year retirement.

The DWP has indicated that it is early days to draw a comparison, but our analysis was based on 546,000 new state pensioners. Those covered under the last few years of the old system could be forgiven for feeling a little aggrieved.

Another group with cause for complaint are some of the 1.2 million retirees living overseas as there is a huge variation in how much they’ll be getting – and it’s dictated by the country they’ve ended up in and whether there is an annual index-linked rise. Expatriates living in some of the most popular destinations – Australia (239,692 UK pensioners), Canada (142,764) and New Zealand (65,742) – collect a ‘frozen’ weekly pension averaging £44.78, £41.00 and £42.47 respectively.

Moving to a country in the European Economic Area, or one with a social security agreement with the UK, will mean your pension goes up each year. The 108,049 ex-pats who’ve decamped to Spain receive an average of £107.76, while 66,831 retirees in France get £104.39 each week. Curiously, the 10 UK nationals who’ve settled in the Republic of Azerbaijan receive a particularly generous average weekly payment of £127.01.

Harry Rose, Which? Money Editor, said:

“Our evidence shows how variable people’s state pension payments still are. Many pensioners will be shocked by the differences in average payouts to men and women and those qualifying under the old and new systems. Some pay gaps will close eventually, but not soon enough for some.

“There are steps people can take to put themselves in a stronger position, for instance by planning their retirement budgets in advance and taking advantage of the forthcoming pensions dashboard. But the DWP must also play its part by ensuring it provides accurate forecasts that are easily accessible.”

The full analysis appears in the May issue of Which? Money magazine.

For those looking to get a state pension forecast or an overview of their options more broadly – the Pension Service, Future Pension Centre, Pension Wise service, Pensions Advisory Service or Which?’s own guidance are good first ports of call.

For Which?’s guidance on how the state pension works visit: which.co.uk/statepension

Notes to editors

  • Which? was allowed to access the DWP database of UK benefits information and extract data from it. Our analysis covers the latest DWP statistics available (the
    quarter to August 2017), comparing different demographic and regional elements of the government data.
  • The DWP told Which? the new state pension is already further reducing the gender gap. A spokesperson said: “Around 650,000 women reaching state pension age in the first 10 years will receive an average of £8 per week (in 2015/16 earnings terms) more, due to the new state pension valuation of their National Insurance record.”
  • In response to the research, the DWP also told Which?:

“The statistics currently available on the new State Pension are not yet sufficiently representative to draw robust comparisons between the old system and the new one. This is because they only cover the period April 2016 to August 2017: in that period only a few hundred thousand people have made new claims, whereas the statistics for the previous system are based on 12 million people. The answer to (2) [see below] shows that the way that State Pension age changes have been phased, impacts the profile of customers flowing on to the register, therefore a longer timeframe is required in order for the impacts of peaks and troughs of particular client types to be evened out.”

(2). Of the 546,113 covered under the nSP so far, only 20.6% are women. Why is the proportion so low?
“There is not an even spread of people reaching State Pension age each month. The way that the equalisation of men’s and women’s State Pension age has been phased has affected the dates when people reach their State Pension age. Since April 2010, women’s State Pension age has been gradually increasing to bring it into line with men’s. You will see in the State Pension age timetables (table 2) that there are tranches of inflows to women reaching their State Pension age, depending on (i) their date of birth and (ii) the State Pension age equalisation timetable: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/310231/spa-timetable.pdf

“The average amounts for new State Pension shown in question 1 may in part be affected by the higher proportion of men in this particular cohort. Over time, the profile of customers and payments is likely to change.”

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