Introduction

A recurring theme in population ageing is that older people absorb an unfair share of national resources in which sustainability of state pensions and services and the legitimacy of state welfare are challenged (World Bank, 1994). The moral panic about intergenerational inequity gained political traction in the US (Samuelson, 1958; Preston, 1984), where Americans for Generational Equity (AGE) – funded mainly by the finance industry – took up the theme, advocating cuts in social security and increased private insurance (Quadagno, 1989). The policy of cutting state welfare for older people in the interests of younger people was formalised by Kotlikoff (1992) as ‘Generational Accounting’.

In Thatcher's Britain too, concerns about generational conflict over state welfare were expressed in Johnson and colleagues (1989). More recently, the Intergenerational Foundation (IF) think tank argued that spending on older people's state pensions, benefits, NHS and social care is unfair to younger generations facing lower living standards than their forebears. Provocatively titled books on this theme include those by Willetts (2010) and Howker and Malik (2010). The crisis rhetoric of apocalyptic demography cites statistics such as the ‘age support ratio’ (age 20–64/age 65+) which in the UK declined from 5.5 in 1950 to 3.7 in 2014 (Franklin et al, 2016, p 33). This ratio, however, neglects rising women's employment (from 55% to 71% between 1977 and 2017) and productivity gains. Organisation for Economic Co‑operation and Development (OECD) projections ignore the effects of future immigration, an unpredictable future birth rate and shaky assumptions about increasing life expectancy.

The Work and Pensions Select Committee inquiry recently considered the issue of equity between generations (WPSC, 2016). While we readily acknowledge that those of working age suffer greatly from public spending cuts, we question both whether this is caused by unjustified spending on older people and the assumption of a zero‑sum game, where generations must compete for finite state spending.

In this chapter, we examine how far the claims of unfair state spending on boomers and pensioners are supported by evidence, while noting the large and persistent structural inequalities within generations. We first consider pensions, then life expectancy.

Key concerns of policy makers throughout the developed world are to ensure financial sustainability of state pension schemes without sacrificing adequacy of pensions to meet the needs of older people and future pensioners. Population ageing, which is partly due to falling fertility rates, has brought the question of sustainability of pensions into prominence, although whether this constitutes a serious problem, and in which countries, has been subject to debate (Walker, 1990; Mullan, 2000; Street and Ginn, 2001). Since the employment rate in the working age population is also important to the viability of any pension scheme (state or private) it is useful to consider the relationship between women’s fertility and their employment. Is there an inevitable trade-off, for women, between social reproduction and economic production?

The chapter first considers the social value of unpaid care work and compares women’s fertility and their employment across EU countries. Britain’s pension system is then compared with those of other EU countries in terms of adequacy, gender inequality of later life income and the treatment of family caring. Finally, the question of moving towards an independence model of pensions is discussed.

The gendered lifecourse and social reproduction

The research reported in Chapters Four and Five focused on the impact of women’s childcare commitments on their employment and pensions in the context of a lack of affordable childcare services in Britain. The government recognise that mothers find childcare a barrier to employment: “Women tell us that a key obstacle to their re-entering the labour market is accessing affordable and good quality childcare” (DWP, 2002, p 117), although it is not only childcare that conflicts with women’s employment participation. Women over age 50 are often called upon to provide informal care for ageing parents or parents-in-law or to look after their grandchildren while their daughters or daughters-in-law engage in paid work.

The provision of family caring and consequences for employment and pension building are usually seen as problems solely for women. For practical reasons, earlier chapters of this book are based on the assumption that working age carers are usually women, neglecting those men who also devote time to family caring at the expense of their employment, earnings and pension rights.

Since the 1960s, a more permissive social and legal climate concerning sexual relationships and family forms has led to parallel demographic trends in many western countries. These include rising cohabitation, postponement of marriage, increased divorce rates and extramarital births, increased use of family planning and low fertility rates – a set of changes that has been termed the second demographic transition.

The far-reaching changes in partnership status and parenting create new challenges for a pension system originally based on the male breadwinner– female homemaker model. Public pensions established means of providing pensions for married women and widows (Daly, 1996; Sainsbury, 1996; see also Chapter One), while occupational pensions have also generally provided widows’ pensions. At a time when the link between marriage and motherhood was close, such derived rights based on a husband’s contribution record ensured that most mothers received some pension compensation for their unpaid childrearing role, as well as for providing domestic services to their family more generally. Yet the separation of the roles of wife and mother, as the link between marriage and childrearing loosens, raises questions for pension schemes – both state and private.

Changing family forms and gender roles are often neglected in analysis of pension policy, where the predominant focus has been state and market, as noted by O’Connor et al (1999).

In this chapter, I first consider issues of equity arising from the growing mismatch between family forms and the acquisition of pension rights through marriage, then review the divergence of marriage and motherhood and the gap in childcare provision in Britain. The chapter then considers how partnership status affects employment and pension acquisition, drawing on research using data from three years of the British General Household Survey (Ginn and Price, 2002) and focusing on the pension prospects of divorced and separated women.

Derived pensions: issues of equity

The generation of women born before 1940 grew up with a pension system based on the male breadwinner–female homemaker model, as outlined in Chapter One. The Beveridge structure of National Insurance discouraged married women from building independent state and private pension entitlements through employment and pension contributions, thus rewarding and reinforcing the male breadwinner model (Allatt, 1981; Baldwin and Falkingham, 1994).

This chapter examines the pension arrangements made by British men and women of working age from five minority ethnic groups – Indian, black, Chinese/other, Pakistani and Bangladeshi, compared with white. Key questions are the extent to which private pension coverage is lower for men and women from each ethnic minority, compared with white people; whether ethnic differences in coverage relate mainly to variation in employment participation; whether gender inequality in pension coverage is similar across all ethnic groups; and whether the influence of motherhood on employment and pension scheme membership applies equally to women from each ethnic group. The chapter is based on research using three years of the British Family Resources Survey combined, 1994/95, 1995/96 and 1996/97 (Ginn and Arber, 2000b, 2001). First, the income and receipt of private pensions by older men and women from minority ethnic groups are compared with that of white people.

Incomes of older men and women from minority ethnic groups

Incomes of older British individuals from minority ethnic groups are on average lower than those of white people and reliance on means-tested income support is greater (Berthoud, 1998), with particularly high rates of poverty among minority ethnic women who are not married. In each ethnic group older women’s personal income is lower than men’s (Ginn and Arber, 2000b). In terms of other measures of wealth – car ownership and housing tenure – older people from minority ethnic groups tend to be disadvantaged, although certain ethnic groups such as Indians and Chinese have rates of home ownership comparable with that of white people.

White men aged over 60 had a median personal income of £141 per week in the mid-1990s, compared with only £120 for black people, Indian and Chinese/other men (see Table 3.1, first two columns). Although the Pakistani/Bangladeshi group of men had a higher income, this must be set against the very low income of women in this group. The gender gap in income was least among black people (Table 3.1, third column). Thus among those aged over 60, white women’s median income was 62% of men’s but black women’s was 80% of black men’s. The gender gap in income was wider for older Indians than for white people and wider still for older Pakistanis/Bangladeshis.

The effect of raising children on British women’s employment, earnings and pension prospects was examined in Chapter Four, distinguishing according to partnership status. The analysis confirmed major divisions among women – between the child-free and those with dependent children and between partnered and lone mothers. Yet within these groups, women are further divided in terms of their human capital. Researchers have found a polarisation in British mothers’ employment, in which those with high educational qualifications and occupational experience are able to buy childcare services and further their career, whereas others are constrained in their employment options by low earning power and unaffordable childcare.

British women’s increasing levels of educational attainment have led to expectations of gender convergence in employment patterns and hence in lifetime earnings and pension income. As a growing proportion of women obtain graduate-level qualifications, they can expect to earn wages high enough to afford comprehensive childcare services. It is supposed that they will be able to maintain full-time employment after childbirth and maternity leave, matching men’s traditional pattern of full-time continuous employment. Thus, according to an important and influential Cabinet Office publication (Rake et al, 2000), the ‘motherhood gap’ in pensions – the difference between a childless woman and a comparable mother – will in future be negligible for young women with a degree or equivalent qualification. This conclusion echoes the finding of a computer-simulation exercise by Davies et al (2000), which indicated that for women with high educational qualifications motherhood would typically incur no pension loss, as their employment would be almost continuously full time across their reproductive years. These authors suggest that for a typical graduate mother “employment is hardly perturbed by bearing two children”, and that “part-time employment is limited for the mid-educated and negligible for graduates” (Davies et al, 2000, p 297). Rake et al (2000, p 85), drawing on these computer simulation results, conclude that the effects of child bearing are minimal for graduate women: “High-skilled mothers of two are estimated to remain continuously employed, with one year of part-time work following the birth of their second child.”

The simulation exercise by Davies et al (2000) is valuable in illustrating the consequences of motherhood for women’s incomes in later life and how these are likely to vary with educational level.

Statistical tables

As the main source of income in later life, pensions can make the difference between a daily struggle and a period of fulfilment, between merely surviving and actively thriving. At the start of the twenty-first century, life in retirement has lengthened, with people living an average of over 20 years beyond the state pension age. With longer lives, an adequate pension income is more necessary than ever before. Women’s savings have to last longer than men’s, as they can currently expect to live another 22 years after age 60 compared with 18 for men (OECD, 2001a).

There is a widespread sense of crisis and uncertainty over the future of pensions in Britain. While state pensions are apparently in terminal decline due to the policy of successive governments, the risks of reliance on the private sector of pensions are increasingly evident. Plummeting projections for investment returns and a question mark over the continuation of final salary occupational pension schemes follow a saga of mis-selling in personal pensions. Expressing widespread concern, one financial expert concludes that “The much-trumpeted UK model of private pensions funding looks distressingly shaky” (Plender, 2003, p 1). As a result, many people banking on their private pensions are threatened with an impoverished old age, or a much lower income than they expected. Both the government and the private pensions industry urge people to save even more in private pension schemes, to make up the shortfall. However, the ability to do this is gendered, depending on employment and earnings, and also varies with stage in the lifecourse.

Far-reaching social changes have transformed gender relationships and norms as to partnering and parenting. Major changes include growing expectations of women’s equality and financial independence irrespective of marital status; the sexual revolution, giving women greater control over their fertility; and increasing recognition of the importance of women’s skills in the workplace and the economy as a whole. At the same time, the expectation of lifelong marriage has declined, with increases in divorce, cohabitation and lone parenthood as all these have become more socially acceptable. These changes offer both opportunities and challenges to individuals and society and have profound implications for women’s acquisition of pensions. Yet successive generations encounter (and contribute to) these changes at different stages in their lifecourse, with consequently different effects on their future options.

Few outside government deny that the British pension system is now in crisis, although the exact nature of that crisis is variously defined and gender issues are rarely considered. Critical assessments of current policy abound in the evidence submitted to the Work and Pensions Select Committee’s inquiry (Work and Pensions Committee, 2002), from pension providers and advisers (over 25 submissions), trades unions including the TUC (10), employer organisations including the Confederation of British Industry (2), pensioner organisations including the National Pensioners Convention (7), major pensioner charities (2), think tanks (4), consumer groups, academics and other individuals.

In this chapter the concerns expressed by a range of such commentators are outlined. The reasons why reaching a pensions consensus has proved so difficult are discussed and the main types of rescue plan proposed are considered, focusing on the gender implications of each. Concerns can be grouped into three main areas – pensioner poverty, erosion of saving incentives and the crisis of private pensions.

Pensioner poverty

Member countries of the EU have agreed that pensions should be adequate to ensure that older people can enjoy a “decent standard of living” (EC, 2002, p 5) but the British government has not said what income this would require. Many experts believe that neither the basic state pension nor the means-tested Minimum Income Guarantee (MIG) is adequate, and that the levels of pensioner poverty in Britain, especially among women, are unacceptable (see Chapter Six).

Cuts in state pensions are set to continue, so that wage replacement rates will decline even further in future and the pensions poverty trap will widen. The government’s answer is to expand the system of means-tested benefits through a Pension Credit from October 2003. This will introduce a taper into means testing so that 40% of income above the full basic pension is lost instead of 100% as at present, helping those with incomes slightly above the MIG but also drawing over half of pensioners into means-testing in 2003 and an even larger proportion in future. The government claims the Pension Credit will help women but many older women on low incomes will miss out:

Pension providers and governments alike warn that individuals need to save more through private pensions. Most economists attribute lack of saving to irrational behaviour described as ‘myopia’ – an inappropriately short time horizon. Yet individuals often have sound reasons for reluctance to save additional amounts towards pensions (Rowlingson, 2002). These include a rational response to uncertainties, especially the risk of a poor return on investments. The mis-selling of personal pensions and the theft and misuse of occupational funds are indications of the way pension risks and costs are increasingly passed on to individuals (Ward, 1996; Peggs, 2000; Ring, 2002). Meanwhile state pensions are shrinking as governments seek to reduce state spending on pensions, as part of a more general rolling back of the welfare state (Aldridge, 1998). Confronted with unsatisfactory state pensions and risky private provision, even individuals who can afford to are understandably reluctant to save for their old age in this way.

Widening choice, growing complexity and uncertainty about the future of pensions means an increasing risk of making decisions that do not provide the best value for money. When politicians and pensions experts admit they find the British pension system hard to grasp, it is no wonder that individuals are bemused by pension scheme rules, and that many feel alienated or misled by ‘information’ from the state or the purveyors of private pensions. For those with interrupted and unpredictable employment trajectories, choosing an optimal pension strategy becomes well-nigh impossible.

This chapter first considers the issue of pension choice in the context of uncertainty about risks in the various types of second tier pensions. Gender and class inequalities in pension coverage are then analysed using data from the General Household Survey (GHS). The characteristics of employees who opted for a personal pension or who remained in the state pension scheme are examined, distinguishing between those who could have belonged to an occupational pension and those who lacked access to such a scheme. The chapter finally considers the issue of mis-selling of personal pension plans to men and women for whom this was unlikely to be the best option.

Choice, information and risk

Pension choices were limited during the post-war period before the 1980s. Where employers offered an occupational pension scheme, membership was compulsory.