A tough road for women

They live longer, and they tend to work fewer years, than men. Women need to think even harder about planning for their retirement.

There are no two ways about it - pensions are boring. Thankfully, once you have decided which one you want, you can relax. Or at least you can if you are a man. If you are a woman, things can be a lot more complicated. The statistics point to a potentially bleak old age for women. A third of women have a standard of living below the poverty line when they retire, according to a report by the Equal Opportunities Commission, and more than 1.5 million women have to depend on state benefits when they retire, compared to 250,000 men.

When it comes to pensions, women get a worse deal than men for a number of reasons. First, you only get out of it what you put in. Women tend to work fewer years than men and even those with full-time careers tend to take time out for children.

Even a short career break has a severe impact on a woman's pension. A five-year time-out can reduce the size of a woman's pension fund on retirement by between a fifth and a third, according to figures produced by the financial services group Flemings.

That loss is particularly important for women. When you retire, the fund you have built up over the years is usually used to buy an annuity - an insurance company will agree to pay you a certain amount each year until you die. On average, women tend to live longer than men.

As a result, women have to pay more for their annuity than men do, so they need to have saved up more money in their pension fund. A woman could buy an annuity which would produce an annual income around 10 per cent lower than a man with the same money to spend.

But probably the greatest problem for many women is that their husband is the major breadwinner. That needn't be a problem if the couple stay together. But with 180,000 divorces each year, many women were being left with nothing.

Since July last year, the courts have been allowed to take the husband's pension fund into account when arriving at a divorce settlement. The courts will take the woman's pension fund into account too if she has one.

The courts can compensate the wife for loss of pension rights by giving her a greater share of other assets - the house, for example. They also have powers now to "earmark" some of the pension fund to the woman, who receives it when her ex-husband retires. The problem with earmarking is that if he dies the pension may stop and if he dies before retirement she gets nothing at all. Earmarking also means that the woman has to keep in touch with an ex-husband she might despise. The husband might want a clean break too.

Earlier this month the Government published proposals which would allow a clean split of a pension fund on divorce. The new law would allow a wife, or husband, to claim a share of their spouse's pension fund and have it transferred into their own pension. If you don't have your own pension you would be able to use the transferred funds to start one.

If your ex-spouse is a member of a company pension scheme, you would be able to join that scheme as a separate member if you want to. The pension company which runs the scheme would have to explain the benefits of joining the scheme and the benefits of transferring out. If it is a public sector pension scheme, you probably would not get the option to transfer out.

Importantly, you would have your pension paid when you reach retirement age, regardless of how old your ex-spouse is.

This is all good news for women - and for men who have wives who earn more than they do. The catch is that the new laws will not be introduced for another three years.

In the meantime? "Women have two basic problems," said David Oliver of the accountants Arthur Andersen. "Overall they work less than men on average because a lot of them take time out to have children. They also tend to live longer. These are two brutal facts. You could say that women are hard done by, but arguably it is better to live an extra few years and have a smaller pension. But it does mean that it is more important for women to start thinking earlier about their circumstances in retirement"