Pensions

Rising Pension Age Hits Women’s Savings in UK

Approximately 1.1 million fewer women are receiving a state pension because of the increase in pension age from 60 to 63, according to a report from the UK’s Institute for Fiscal Studies (IFS).

According to the report, affected households are receiving an estimated £74 ($98) a week less in state pensions and other state benefits as a result of the pension age increase, which occurred between 2010 and 2016.

“The net effect is that household incomes for women in this age group have fallen by around £32 per week on average,” said the report. “The reduction is similar in cash terms for richer and poorer households, meaning that while the average drop in proportional terms is 12%, the decline is significantly larger, on average, for low-income households (21%) than for high-income households (4%).”

The drop in household incomes caused by the pension age increase have pushed income poverty among 60- to 62-year-old women up sharply, said the report. However, “we found no evidence of any change in measures of material deprivation (that is, people saying that they cannot afford a range of important items),” said the report. “This might suggest that, despite lower incomes, so far families have generally managed to avoid higher levels of deprivation by smoothing their spending over time.”

For women aged 60 to 62, who now fall below the state pension age, the age increase raised employment rates significantly, increasing the gross earnings of these women by £2.5 billion in total. The report said that for all 60-to 62-year-old women (including those not in paid work), this is equivalent to an average of £44 per week. Despite this increase in employment, it’s not sufficient enough to counter lower incomes, said the report.

“The increased state pension age is boosting employment—and therefore earnings—of affected women,” said Jonathan Cribb, a senior research economist at the IFS, “but this is only partially offsetting reduced incomes from state pensions and other benefits.”

Additional findings from the report include:

  • The increased state pension age from 60 to 63 boosts the public finances by £5.1 billion per year by 2015–16. The female state pension age is currently continuing to rise, reaching 65 in 2018 and (along with men), and 66 in 2020.
  • Rates of income poverty among women are greater for those just below the state pension age than for those just above it. The increase in income poverty from increasing the state pension age is due to fact that the working age tax and benefit system is considerably less generous than for those over the state pension age.
  • The same reform increases the age that single men can claim Pension Credit from 60 to 63 over the same period. The reform reduces benefit incomes of single men aged 60 to 62 by an average of £21 per week (from a pre-reform average of £89), and increases their income poverty rates by 6.1%.

Tags: Institute for Fiscal Studies, pension, UK

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