2 August 2017
- Controlling State Pension costs is right but 1 in 5 women affected pushed into poverty
- IFS research shows rising State Pension age saves billions but leaves many in hardship
- Working age benefits are not enough to support women unable to keep working
- Government failure to properly inform women could justify helping some bridge the gap
Government is right to look to control the costs of state pensions: Clearly, in an aging population, with rising longevity and pay-as-you-go pensions, younger generations need to be protected against excessive burdens of old-age support. Equalising men and women’s pension ages makes sense, especially as women tend to live longer than men.
Failure to adequately warn women about rise from age 60: Ideally, though, any policy changes would be communicated well in advance and those affected would be given sufficient time to prepare for delays in starting pension receipt. Unfortunately, as the WASPI campaign highlights, the failure to communicate clearly and effectively is causing real problems for many of the women affected by the sharp pension age increases which started in 2010.
IFS shows significant cost savings: Research released today show the scale of the impact of rising State Pension age on those older people affected and on the public finances. The rise in women’s State Pension age between 2010 and 2016 has saved over £5billion in public spending and has benefited the Government in three ways. Firstly, the money saved by not paying pensioner benefits. Secondly, higher tax and national insurance receipts as women have continued working while waiting for their State Pension. Thirdly, the additional work these older women are doing should have boosted the economy.
But delayed pensions also caused increased poverty: Many of the women waiting longer for their state pension have been pushed into poverty. The IFS suggests one in five women aged 60-62 were in income poverty when their state pension age was increased to 63. It is clear from this new research that as long as women can keep working, they can mitigate the impact of delayed State Pension receipt, but those who cannot work either through illness, caring duties, unemployment or workplace age discrimination are left struggling.
Men are also affected by this change: Up to 2010, older men who were unable to work and had little other income could claim pension credit but the starting age for receipt of means-tested Pension Credit is also tied to women’s state pension age. So, as women’s state pension age rose to 63, men also had to wait longer for extra help. The IFS suggests that many single men have also been forced into income poverty as a result of this delay.
As State Pension age keeps rising, no allowance is made for those who cannot work: There is a stark cliff-edge between the benefits available to people below state pension age and those above it. This is designed to encourage more people to keep working, however it makes no allowances for the problems of the significant minority of older people who genuinely cannot work. By 2020, the age for men and women will rise to 66 so the numbers in poverty will grow.
The poverty is temporary, but there’s no help to bridge the gap: The IFS points out that this poverty is temporary and as soon as they reach the new higher State Pension starting age, people will be better off. However there is nothing in the system to help those who really need to bridge the gap. If they have no private pension or other savings (and many older women have been particularly disadvantaged throughout their lives by lower earnings and lack of pension rights) then they have no choice but to cut back their spending to minimal levels. The IFS suggests they are not facing ‘material deprivation’ but politically there is a large group of older people who feel they have been unfairly treated and were not given sufficient chance to prepare themselves. Those affected might have been able to cut their spending in earlier years if they had been aware of the coming increase in their pension age. By failing to properly inform them, the hardship caused has been exacerbated.
Government could consider measures to ease the hardship of transition: There are no easy answers here, and it is important to control state spending, but I do hope Government might consider devising interim measures to help women – and men – in the transition period between their previous State Pension age and the new later date. Perhaps with early but reduced access to State Pensions, or payments that recognise poor health and other impediments to working longer, targeted on those in hardship due to the delayed pension age. It cannot be beyond the wit of policymakers to recognise the problems caused by the sharp rise in pension ages over a relatively short period of time and, in light of the cost savings, perhaps some help could be offered.