Hundreds of thousands of women who would otherwise have failed to qualify for the full state pension will now do so under the Pensions Bill introduced yesterday.

The qualifying period is cut to 30 years from 2010; at present it is 39 years for a woman and 44 for a man. It will mean that women who now typically receive £77 a week on retiring will eventually get £130.

An analysis of the impact on women shows that the gender gap in state pension provision is being virtually eliminated, according to ministers. Far more women benefit than originally thought. And better pensions for women will have the impact of halving the gender gap which they suffer in the labour market, the research says.

The reforms, introduced by John Hutton, the Work and Pensions Secretary, also mean that women will not be penalised for taking time off work to look after children or relatives. Those who do so will receive weekly credits treated in the same way as national insurance contributions and therefore counting as qualifying time for a pension.

Today only 30 per cent of women reaching state pension age are entitled to a full pension, compared with 85 per cent for men. When the reduction in the qualifying period is introduced in 2010 the figure will have risen to 75 per cent of women, increasing to more than 90 per cent by 2025. More than 300,000 more women will get a full pension by 2020, rising to almost 500,000 more by 2025.

About 120,000 people will gain from the introduction of the new carer’s credit in 2010; 85,000 will be women.

A woman who takes five years out to care for children and then returns to work will on retirement find herself on virtually the same state pension as a man.

The Pensions Department also produced figures showing how better pensions would halve the gender gap. An average female earner is now on £19,240 whereas a male is on £24,440. Without reform the woman would have got a £166 weekly retirement income compared with the man’s £208. The reforms will give her a weekly retirement income of £196.

The National Pensioners’ Convention criticised the strict 2010 cut-off date for the rules. It said that a woman reaching pension age on the day the new rules come into force would benefit from them, but a woman who retired a day earlier would not. For example, on a record of 30 years’ contributions, a woman would get 100 per cent pension under the new rules but only 77 per cent under the present rules. So a one-day difference in age could make a difference of about £19.40 a week to the pension.

The Bill will make plain that the state pension will rise in line with earnings rather than prices, almost certainly from 2012. The pension age will rise from 65 to 66 by 2026, to 67 by 2036 and 68 by 2046.

The pensioners’ convention also criticised the Bill for ignoring the needs of existing pensioners. It said that three million of them would have died by the time the link with earnings in 2012 was restored. Even those lucky enough to receive a pension in six years’ time would gain only an extra £1.40 a week more than under the present system because by then the state pension will have fallen to just 12 per cent of average earnings (£71 a week in value).

It added that raising the retirement age was not necessary to fund better state pensions. The National Insurance fund already has a surplus of more than £34 billion, which is forecast to rise to £60 billion by 2010. This is more than enough to pay for a higher state pension for all, linked to earnings.

Jenny Watson, chairwoman of the Equal Opportunities Commission, called the Bill an important step towards ending the scandalous inequalities currently faced by women in retirement. She said: “The unpaid contribution to society made by millions of parents and carers will finally be recognised and rewarded on the same terms as paid employment.”

Statistics

30 Number of years at work to get full basic state pension

90% percentage of women eligible for full state pension by 2025 (30% today)

4% Amount of earnings employees must set aside

£57bn Estimated savings gap that schemes will help to reduce

68 State pension age by 2046 rising from 65 to 66 by 2026, to 67 by 2036

£130 What average state pension for women should reach

Source: Pensions Bill

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