Women carers miss out on thousands in pensions shake-up

Thousands of women who stayed at home to raise children or care for elderly relatives will lose out on up to £28,500 each under the forthcoming pensions shake-up.

Ministers want to make it easier for women to take a career break to look after their families without risking the amount of money they receive in retirement.

From April 6 2010, a woman will only have to work for 30 years to make sufficient National Insurance contributions to qualify for a full state pension.

But 1.2 million women who reach the retirement age before then must have worked for 39 years - meaning they are penalised if they stay at home to bring up children or care for ailing relatives.

Since 70 per cent of women do not currently qualify for a full pension, some 800,000 will be caught in this pensions gap over the next three years.

Liberal Democrat MP Steve Webb said a typical woman who quits work for nine years to look after her children would lose up to £28,500.

It means they face a retirement in poverty and a struggle to pay for eating, heating, clothing and other everyday costs. In total, the cost to retiring women will be about £4.3 billion, according to Department for Work and Pensions figures.

Campaigners say the change in the rules is welcome but they are concerned about the "cliff-edge" created by the cut-off date.

Mr Webb said: "The new system will cost many women retiring on or before April 5, 2010, many thousands of pounds and that is incredibly unfair. Being born one day too soon could cost a woman £27,000 or £28,000 - the sums are huge.

"It is the difference between having your retirement transformed by enjoying holidays, meals at nice restaurants or having the house decorated, and being forced to scrimp and watch every penny.

"It is penalising women who have taken time off work to bring up young children or who look after elderly relatives."

Mr Webb is pressing the Government to reduce the severity of the differences by phasing in the changes over at least five years.

The basic state pension is currently £87.30 a week. A woman retiring on or before April 5, 2010, who worked for 30 years would receive 77 per cent of the full pension.

Official House of Commons statisticians have verified that on the basis of the current value, this would be £20.15 a week less than a full pension - or £1,048 a year.

As the Government estimates that female life expectancy at 60 is just over 27 years, the difference over the remaining lifetime would be £28,495.

Chris Grayling, the Conservative work and pensions spokesman, said: "It's typical of this government to make an eye-catching announcement only for problems with it to be hidden in the small print."

Dr Ros Altmann, an independent pension expert, said: "Women and carers contribute to society in ways other than the waged labour. To make them wait until 2010 for a better pension is wrong."

A Department for Work and Pensions spokesman said: "We believe that women's lower state pensions should be addressed as soon as possible.

"We have looked at a number of phasing options, but these would mean fewer women able to benefit from a full Basic State Pension in 2010."

Only 30 per cent of women retire on a full basic state pension, compared with 85 per cent of men.

• Elizabeth Jones will turn 60 in February 2010, five weeks before the pensions shake-up takes effect.

If the mother of two had been born five weeks later, she would have enjoyed an extra £10,000 in her retirement.

She is one of about 800,000 women who will miss out on thousands of pounds because she reaches the state retirement age before April 6, 2010.

From then, women will only need to work for 30 years to qualify for a full state pension.

Before then, it is 39 years. Because she went to college and then took a career break to have children, Mrs Jones will not hit the target.

The legal manager from Gloucestershire said: "It is ridiculous that we are missing out because of an arbitrary date. I was born premature and if I'd have been born on the right date, I would qualify for the full pension.

"I have been penalised for not starting work at 16, for not drawing benefits, for going to college to get an education and for staying at home to look after my children.

"I feel that it is totally unfair."