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IFS: pensioner poverty rises as Treasury saves £5bn

Government under pressure to help people hurt by state pension age rises as Institute for Fiscal Studies says reforms save £5.1bn a year.

IFS: pensioner poverty rises as Treasury saves £5bn

Retirement experts have repeated calls on the government to help women and men hurt by rises in the state pension age after the Institute for Fiscal Studies (IFS) calculated the reforms were saving the Treasury £5.1 billion a year.

From 2010 to 2016 the age at which people can claim their state pension increased from 60 to 63 for women as part of an equalisation between men and women.

This has created an annual windfall for the government as it receives £900 million more in national insurance contributions as people work longer and spends £4.2 billion less on state pensions, the IFS said.

Over one million women affected lose out on £32 a week, the IFS research found. On the one hand 1.1 million women receive roughly £74 less a week in state pension and other benefits. On the other hand this was offset by women working for longer, with gross earnings up by £2.5 billion or £44 per week.

Nevertheless, as a result of the changes to the state pension age (SPA) 15% of women aged between 60 and 62 were now in poverty, a rise of 6.4 percentage points.

Jonathan Cribb, a senior research economist at the IFS, said the research found rising employment rates were not covering the lost benefits from the SPA rise.

‘The increased state pension age is boosting employment – and therefore earnings – of affected women but this is only partially offsetting reduced incomes from state pensions and other benefits,’ he said.

‘Since both rich and poor women are losing out by, on average, roughly similar amounts the reform increases income poverty rates among households containing a woman who has reached age 60 but has not yet reached her state pension age.’

Although the IFS said the rise in poverty was temporary and there was no evidence of an increase in people unable to afford basic necessities, it urged the government to communicate the changes better to the public so people could plan. This follows a successful campaign by Women Against State Pension Inequality, or Waspi (pictured), which has highlighted the lack of effective information provided by the government.

Kate Smith of pension provider Aegon said: ‘These IFS figures clearly show that state pension changes are hurting now, driving more women pensioners into poverty as a result of changes many were simply not made aware of and so couldn’t plan around. While some are in a privileged position to cover the unforeseen shortfall through savings or a private pension, many are not – our own research highlights that women have on average £48,700 less in private pension savings than men.

‘We are calling on the government to allow people to choose to access their state pension a few years early, at a reduced level, to balance the cost. These calls have been rejected on grounds of complexity, but with the latest changes not coming into force for 20 years, we firmly believe that more thought can be given to making them work. These IFS figures only go to show how necessary this change is.’

Former pensions minister Ros Altmann said it was important to control state spending but urged the government to devise interim measures to help women and men suffering hardship during the transition between their previous state pension age and the new later date.

‘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,’ she said.

Altman pointed out that men had also been affected by the changes as means-tested pension credit was tied to women’s state pension age, meaning more had to wait to 63 to get extra help. ‘The IFS suggests that many single men have also been forced into income poverty as a result of this delay,’ she said.

Last month the new pensions minister Guy Opperman suggested women hit by SPA rises should seek apprenticeships.

5 comments so far. Why not have your say?


Aug 03, 2017 at 09:39

"driving more women pensioners into poverty as a result of change"

The point is that they are NOT pensioners (... though it is likely that some of them will be in poverty by the time they eventually reach their state pension age if they have been unfortunate enough to lose their job at the age of fifty something and have low savings/private pension. - Same applies to men of course!)

- Many of the women born in the 1950s have had a 6-year extension to their state pension age, which equates to very approximately £48,000, with a very fast transition;

- many were not adequately informed in advance. The argument that women had 15 years' notice has no basis if they were not informed at all;

- most are not against equalisation of state pension age, only against the rapid implementation of it and they are dismayed by lack of understanding by someone who suggests that they should seek an apprenticeship at 60+;

- many of them do understand the need to control state spending but feel that they have had to carry more of the load (6 years of state pension for example) than other groups, especially those only one or two years older;

- WASPIs do not represent all of the women of this age group. "63 is the new 60" seeks a compromise, a slower transition without a reduced pension for life which would indeed lead to poverty in old age for some of them;

- the contribution by many of the women born in the 1950s who are caring for elderly parents and consequently reducing government expenditure on care, quietly in their own way doing the right thing, appears not to have been taken into consideration;

- Nor has account been taken of their earliest years at work, when some of the women born in the 1950s were actually not allowed (!) to join a company pension scheme, purely because they were women. Few of these women have had the opportunity to catch up with their male colleagues, even though equality between the sexes may exist now, benefiting today's 21 year olds for example, for the whole of their lives, not just the second half.

There are many aspects and I have only listed a few. As with pensions generally, the matter is far more complex than it appears at first glance.

There is inevitably going to be turbulence around the transition and this should without doubt have been managed better. The simplification of the state pension going forward, as well as the equalisation of the SPA and encouragement to contribute to a private pension whenever possible are all good however, imo.

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Aug 04, 2017 at 09:13

Apprenticeships on offer at the company I work for are for electrical, plumbing and gas. How many 60+ females affected by pension age increase are likely to apply for those let alone be successful. The work is all in residential housing and one needs to be physically fit to be able to crawl around attics etc. I'm not being ageist I'm being practical. Yes pensions minister, take on an apprentice of my age (61 years), at the end of a four year gas apprenticeship at age 65 I'll be counting down the days to collecting my state pension if the age hasn't been altered again...get real....politicians don't have a clue, companies are highly unlikely to take on age 60+ apprentices when they get numerous applications from younger applicants for each position. By the way, I'm very fortunate to have a job and it's office based...fingers crossed I'm not made redundant.

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Aug 04, 2017 at 13:08

One other important point not mentioned is that if they were contracted out of SERPS and have something known as Guaranteed |Minimum Pension (GMP) and retired from their occupational pension scheme before age 60 their occupational pension scheme only pays increases on that part of their occupational pension scheme with a GMP up to age 60 and then stopped as under the old rules the DWP used to take over payment of all or part of their GMP increases once they reached state pension age.

Under the new state pension if a person reaches state pension age on and after 6 April 2016 they will never receive increases on their GMP that used to be paid by the DWP to people reaching state pension age prior to 6 April 2016.

Potential loss of up to about £20,000. This also affects men who reach state pension age on and after 6 April 2016.

There is an exception if the person works in the public sector and reaches state pension age on and after 6 April 2016 as the Government passed a special law that makes the public service pension scheme pay the GMP increases that used to be paid by the DWP with the state pension. At the moment this only applies to public service employees who reach state pension age prior to 6 December 2018.

For those public service employees who reach state pension age on and after 6 December 2018 their is a consultation going on at the moment by the Treasury to see if they should also be allowed to have their GMP increases paid via their public service pension scheme. This has been going on since November last year and as far as I am aware a the results of the consultation have not been published.

The worst thing about the loss of the GMP is that the Government and DWP did not mention it in the Green and White papers and have not told Parliament that the GMP increases ceased for people reaching state pension age on and after 6 April 2016 and on top of this they have made special rules so that they and all public service employees are not affected. No thought about telling the non public service sector.

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Aug 04, 2017 at 14:59

Jasper40: "fingers crossed I'm not made redundant" I think that sums it up for many people!

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Michael Stevens

Aug 05, 2017 at 10:19

Ladies have had plenty of time from1995 when the age increase was announced.

I as a man paid 47 years of N.I. to obtain my pension at 65.

!909 the State Pension was introduced at 70. Only about 50% of the people obtain 70.

The age should increase to 70 by 2050

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