State pension age increase hands government more than £5bn a year

Andrew Cummings
August 3, 2017

Income poverty among 60 to 62 year old women is up sharply (by 6.4 percentage points compared to a pre-reform poverty rate among women of this age of 14.8%), due to the fact that the working age tax and benefit system is considerably less generous than that faced by those over the state pension age.

The increased state pension age was lifting employment and therefore the earnings of affected women but that was only partially offsetting reduced incomes from state pensions and other benefits, the IFS said.

The state pension age for women rose to 63 between 2010 and 2016, meaning the government has saved £4.2bn on pension and benefit costs, according to analysis released today by the Institute of Fiscal Studies (IFS).

However, this sharp increase in the SPA means that, on average, household incomes for women between 60 and 62 have fallen by £32 a week, with the poorest households being hit on a proportional basis the hardest.

The Women Against State Pension Inequality campaign has hit out at Government increases to the state pension age again as a new report suggests that reforms have delivered £5.1bn back to the Treasury.

Jonathan Cribb, a senior research economist at the IFS, and an author of the report, said while increasing the state pension age is a "coherent response to the public finance challenge posed by rising longevity" it does place further pressure on household budgets.

"Yet again it is women who are paying the price for the government's pension reforms".

She also warns that as SPA creeps up no provision is being made for either men or women whose health prevents them working: "There is a stark cliff-edge between the benefits available to people below state pension age and those above it. It is important the government communicates the ongoing increases in the state pension age clearly so that families can plan for their retirement as well as possible".

"It is hoped over the longer term most of the differences between men and women's pension income will become more equal although there is still much to be done to bring them in line".

Ros Altmann, pensions expert, says that the government has been right in increasing the SPA but says it let women down by not giving them sufficient warning of the change.

The savings are likely to go up when the pension age rises to 65 in 2018 and 66 in 2020.

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