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Impact of the financial

and economic crisis

on elderly women

September 2010

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Facts beyond reality

“We need to ensure that pensions do the job intended of providing the maximum support to current and future pensioners, including for vulnerable groups.“ - José Manuel Barroso

The European Union has declared 2010 to be the European Year for Combating Poverty and Social Exclusion, and is emphasizing gender mainstreaming. Gender equality is a key element of the EU’s strategy for anti-poverty and social inclusion. The UN emphasizes that equality and non-discrimination are essential elements in a hu man rights approach to poverty reduction.

The issue of women‘s equality must be put back on the policy agenda. The current economic recession cannot be used as an excuse to post pone taking action on the continuing poverty in which many women find themselves.

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• Ageing populations in all Member States have put existing retirement systems under massive strain and the financial and economic crisis has only increased this pressure.

• European Commission: “As the number of pensioners in Europe rises, and the relative number of people of working age declines, further reforms are needed if adequate pensions are to remain sustainable". From 2015 onwards, deaths are projected to outnumber births in the EU so that, by 2060, one in three Europeans will be aged over 65, putting a huge burden on the economy and public finances.

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What Europeans believe it is likeEUROSTAT, 2009.

• 24% consider people are poor when their resources are so limited that they cannot participate fully in the society they live in. A further 22% of people surveyed see poverty as not being able to afford the basic goods one needs to live, while 21% view it as having to depend on charity or public subsidies.

• Nearly three quarters (73%) feel that poverty in their country is widespread.

• 84% think that poverty has increased in their country in the last three years.

• Over half of Europeans (56%) believe that the unemployed are most at risk of poverty. 41% believe that the elderly are most vulnerable, and 31% see those with a low level of education, training or skills as most at risk.

• With an ageing population, long-term care services are a source of concern: 45% think they are not affordable.

• Across Europe, 53% feel that their national governments are primarily responsible for combating poverty.

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How it is like?• In most EU member states, 22% of older women experience poverty

compared to 17% of men. Among single parents 35% live in poverty, and majority are women.

• Women earn app. 20% less than men in equivalent jobs. The pay gap between men and women throughout their working lives inevitably leaves women with smaller pensions.

• Within the vulnerable group of elderly people, there are those who are particularly at risk. Elderly women often receive a reduced pension allowance because they have cared for family members rather than being professionally active.

• The number of people in the EU aged 65 and above is expected to grow by 70% by 2050, and the number of people aged over 80 by 170%, according to the EU Health Directorate. This will not only require new social security strategies, but it will also have strong implications for health care systems.

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Why it is like that?

• Currently, only 36.8% of women between the ages of 55 and 64 are employed, compared to 55% of men, and European women are four times more likely than men to have part-time jobs, fixed-term contracts or no contracts at all. As a result, some 35% of women aged over 65 risk poverty, compared to 16% of older men.

YES: Women predominate among those with atypical contracts, they tend to earn less than men and tend to take career breaks for caring responsibilities more often than men. As a consequence, their pensions tend to be lower and the risk of poverty tends to be higher among older women, also because they live longer.

* While periods of care are recognised in some PAYG systems, this is less straightforward in funded pension schemes.

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Older – worse!

• While 55 percent of all persons aged 65 and over are elderly women, 70 percent of the elderly poor are women.

• Older women living alone average about 29 percent of all persons 65 and over, but are nearly one-half (49 percent) of all poor persons in these nations.

• At older ages (aged 75 and over), where needs are greatest, 75 percent of the poor are women and 58 percent are women living alone.

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Black side

• In some countries divorced, widowed and never-married women have poverty rates more than double overall elder poverty rates, despite the high average labour force participation rates and pension benefits of their cohorts.

• Women are more likely than men to have poor housing, to neglect their health and struggle to find child-care services. Financial precariousness can cause women to stay with violent men and force others into prostitution and human trafficking. This gender imbalance is likely to grow in the current economic climate.

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Impact of economic crisis?• High rates of poverty around the world had already attracted the

attention of policy-makers even before the economic crisis hit. Anti-poverty strategies become even more important when wages are being cut, employers are facing bankruptcy, pension security is threatened, and social safety nets have been eroded just at the time when people are losing their jobs and need support.

• Now it is possible to see the gender dimension of the recession. At first it seemed to mainly affect men in the car and construction industries, but women are being hit in different ways as they are more economically vulnerable to start off with.

• Freezing and cuts of pensions - realised or planned: Greece, UK, Spain, Romania, Latvia, Poland Croatia

• Cuts in social safety net (social assistance)

BUT: Cutting and freezing pensions leads to furtherincrease of poverty!

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Worse to follow?

• Crisis and lower growth prospects will affect all types of pension schemes.

• Estimates suggest that the crisis will put further pressure on public pension spending over the long-term because economic growth is set to be considerably lower and there is great uncertainty as to the timing of the full recovery.

• In a number of Member States some social security contributions were diverted to newly established mandatory funded pensions. The crisis has underscored this double payment problem and has caused a few governments to halt or lower contributions to private pensions to improve public pension finances.

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Green Paper on Pensions• European Commission President José Manuel Barroso said that "the

crisis has shown the importance of the European approach to pension systems. It has demonstrated the interdependence of the various pension pillars within each Member State and the importance of common EU approaches on solvency and social adequacy. It has also underlined that pension funds are an important part of the financial system”.

• The European Social Charter states that “every elderly person has the right to social protection”. This means that states must ensure that pensions are sufficient to allow elderly persons to lead a “decent life”. Pensions should therefore be index-linked and related to average wage levels and the overall cost of living.

Older people do not have a strong say in politics and media. Their rights areoften ignored and sometimes totally denied. The fact that a clear majority of theelderly are women may also have contributed to this lack of political attention.European political leaders need to review their own policies for the rights ofelderly people.

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Adequate, sustainable and safe pensions?GREEN PAPER does not question Member States' prerogatives in pensions or the roleof social partners and it does not suggest that there is one 'ideal' one-size-fits-all pensionsystem design. The principles of solidarity between generations and national solidarityare key in this regard. in particular, it aims to address the following issues: 

• Ensuring adequate incomes in retirement and making sure pension systems are sustainable in the long term

• Achieving the right balance between work and retirement and facilitating a longer active life • Removing obstacles to people who work in different EU countries and to the internal market

for retirement products • Making pensions safer in the wake of the recent economic crisis, both now and in the longer

term • Making sure pensions are more transparent so that people can take informed decisions about

their own retirement income 

BUT:

• proposals hit women much more than men and the result will be a much higher risk of poverty among older women;

• it is a great pity that the Green Paper does not include a specific section on the gender dimension, despite the fact that the EU is supposed to mainstream gender issues in all its work

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The elderly is one of the vulnerable groups that have been deeply affected by the economic crises. In Europe especially, ageing persons in the so-called transition countries have been hit hard. The number of elderly people begging in the streets goes to prove that their human right to an adequate standard of living is not respected. The term ‘lost generation’ is sadly appropriate.

YES: Hundreds of thousands of elderly persons across Europe are struggling for their everyday survival. Many suffer a shocking level of poverty. They tend  to be ignored by politicians and are often seen as being non productive and worthless in modern society. The human rights of the older generation must not be further undermined when governments introduce their austerity programs.

BUT: In majority of the “old” EU countries, secure incomes from public pensions, which generally have been allowed to perform their role as automatic stabilisers, current pensioners have so far been among those least affected by the crisis. Exceptions apart, benefits from funded schemes still play a marginal role and just a few Member States with very acute public budget problems or well-anchored automatic adjustment mechanisms were compelled to reduce public pensions in payment.

Key findings: Lost generation?

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Key findings: Life-long working?

In the wake of the economic crises several countries have been forced to reform their pension systems, using the similar pattern. Encouraging more people to work more and longer so as to obtain similar entitlements as before: increases in pensionable ages; rewarding later and penalising earlier retirement; moves from benefits based on earnings in best years towards entitlement based on working career average earnings; closing or restricting early exit pathways; labour market measures to encourage and enable older workers to stay in the labour market and encouraging greater gender equality in the labour

PENSION AGE: Setting retirement ages or increasing the pensionable age is the open tendency and the Green Paper does not make firm recommendations, but it encourages the governments to do that to increase the number of contributory years required for a full pension! Women and men – the same pension age without family benefits?! 65? 67? 70? It sounds like - life-long working!

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Key findings: Private, not public?

• PRIVATE FUNDS: The Commission does not advocate one particular type of pension system but it recognises that private and funded pensions are playing an increasing role in the retirement. Unfortunately, in the short term, the return rates and solvency of funded schemes have been affected through falls in interest rates and asset values: private pension funds lost over 20% of their value during 2008.

PLUS: Private pensions discriminate against women! EU legislation permits financial companies to discriminate against women as they have a slightly longer life expectancy than men. This is more likely to hit women who take time out of work for childcare.

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The challenge for policy makers is to design systems of retirement benefits thatguarantee minimum standards of living for all elderly women while also preservingincentives for self financed retirement. In sum, countries that do best in the fightagainst elder poverty are those with high minimum “first pillar” traditional (definedbenefit type) social retirement plans for all elderly. But population aging in comingdecades will increase pressure on these governments to reduce these benefits andto turn their systems more toward defined contribution type pension plans.

Less than 50% of people are still in employment by the age of 60. Thisgoes against Member State commitments at the Barcelona EuropeanCouncil to postpone the age at which people stop working by five years.It is also inconsistent with the objective of reaching the Europe 2020 75%employment rate target and impacts negatively on growth potential. Thesteep rise in old-age dependency ratios could be largely avoided if peoplewould work longer…

Food for thought 1

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Food for thought 2

• States must ensure that pensions are sufficient to allow elderly persons to lead a “decent life”. Pensions should therefore be index-linked and related to average wage levels and the overall cost of living.

The lack of compensatory crediting for periods of unemployment, sickness or caring duties can also lead to gaps, as can lack of coverage of vulnerable groups, such as short-term contract and atypical workers, or insufficient minimum pension guarantees or income provision for older people, but these raise questions about financing!

The issue of women‘s equality must be put back on the policy agenda. We cannot use the current economic recession as an excuse to post pone taking action on the continuing poverty in which many women find themselves. In these un certain times, our commitment to protect those who are most vulnerable matters more than ever.

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Food for thought 3

• There are unclear boundaries between: social security schemes and private schemes; occupational and individual schemes; and voluntary and mandatory schemes.

• More flexibility on retirement ages on the basis of personal preferences and capabilities would be logical, especially when there are not enough resources for decent pensions.

• Member States should address issues such as minimum pensions, coverage of atypical workers and crediting of some involuntary employment breaks (women!)

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The risk is that several generations will face poverty as they grow old is a reality

that seemingly still has not been fully understood by everyone. The risk that

the eldery women pay the highest price is even more out of the public interest.

Lets make our voice heard!

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let people know that being poor is not their fault