Women will be hard hit by the current government policy of allowing state pensions to decline and cannot rely on private pensions to give them an adequate income in later life, a report from the Economic and Social Research Council has warned.
Childcare and other unpaid roles limit women's ability to accumulate private pensions, the report says. In particular, the effect of motherhood on earnings and pensions is dramatic: female graduates with a pre-school child only earn 44 per cent of what childless graduates earn, which has significant implications for their pensions.
For mid-skilled women educated to GCSE level, the negative impact of motherhood on private pension prospects is even greater.
Dr Jay Ginn, Co-director of the Centre for Research on Ageing and Gender at the University of Surrey, who carried out the research, said: "Women's typical sequence of paid and unpaid roles over the course of their lives limits their ability to accumulate private pensions. At the same time, the levelling effect of state pensions is being eroded."
"Only improved state pensions with protection of caring periods, or a universal citizen's pension, can ensure that women's unpaid family work does not lead to poverty and dependency in later life," he added.
Dr Ginn’s research suggests that for the majority of women, their private pension disadvantage – and hence their risk of personal poverty in later life – is unlikely to diminish in the future. At the same time, new patterns of pension disadvantage are emerging, influenced by partnership status, parenthood, class and ethnicity.
For example, older women who are single enjoy a private pension advantage compared with women who were ever married. Compared with married women aged over 65, the chances that a single woman will receive any private pension income are nearly 7 times higher. The chances for widows are 4 times higher but for divorced women, they are only 1.5 times higher.
This 'single premium' is greatly reduced when comparing private pension coverage among mid-life women. It almost disappears in the youngest generation.
Among younger women, marriage and motherhood are diverging, with rising childlessness and childrearing outside marriage. The adverse effect that raising a family has on women's private pension coverage is magnified for lone mothers. Among women aged 20-39, divorced women's chance of having private pension coverage is less than half that of married women.
Divorced women begin to 'catch up' on lost employment, earnings and pension-building only when their children are independent, but they remain at high risk of poverty in later life. Legislation allowing pension-sharing at divorce is therefore unlikely to end divorced women's pension disadvantage compared with other women and divorced men.
The research prompts questions about the value of derived pensions versus independent entitlements. It suggests that the financial security of those who have devoted time to caring for their family is better protected by some form of carer credits than by rights based on legal marital status. But such protection can only be achieved through state pensions.
International comparisons reveal that the UK has a particularly harsh pension system for women, even among ‘liberal’, English-speaking welfare states, as the women-friendly features of state pensions introduced by Barbara Castle in the 1970s has been dismantled or rendered ineffective.
Women's disadvantage in accumulating private pensions has been acknowledged by the government but no changes in pension policy are proposed to remedy the situation.
"Despite women's increased participation in employment, most cannot rely on private pensions to provide an adequate personal income in later life," Dr Ginn warned.
"Only improved state pensions with protection of caring periods, or alternatively a universal citizen's pension, can ensure that women's unpaid family care work does not lead to poverty and dependency in later life."