The increase in women’s state pension age from 60 to 63 has reduced the number of women the government pays pensions to by 1.1 million, netting it a saving of £4.2 billion a year, according to a new report from the Institute of Fiscal Studies (IFS).
Futhermore, increases to the number of women aged between 60 and 62 in paid employment as a result of this change, has boosted income tax receipts and national insurance contributions, earning the government a further £0.9 billion. The gains made by the government are only going to increase further, the report says, as the state pension age (SPA) for both women and men continues to rise. By 2018, women will reach SPA at 65, the same ages as men, at which point, their SPA will rise in line with each other, reaching 66 by 2020.
But affected women are not feeling quite so flush. According to the IFS report, the average woman in this age group has lost out on around £32 of income a week, which has led to a sharp increase in income poverty.
Jonathan Cribb, author of the report and senior research economist at the Institute of Fiscal Studies says: 'The tax and benefit system is much more generous to those above the state pension age than those below it. So, while increasing the state pension age is a coherent response to the public finance challenge posed by rising longevity it does place a further pressure on household budgets.'
He adds: '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.'
Peter Bradshaw, national accounts director at Pensions Monster – an online tool that helps savers work out what to do with their pensions – says the changes have created a retirement nightmare for women.
'The accelerated rise in the state pension age adds further pressure on them to work longer. For some, continuing to work until the state pension age may not be possible due to poor health and so there will be a shortfall between retiring and receiving support from the state. Many women will not receive a full state pension having taken career breaks to care for family members.'
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. 'Ideally, 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 [Women Against State Pension Inequality] 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.'
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. 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.'
This article was originally written by our sister publication Moneywise.
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