Pension age change leaves older women poorer, says IFS

More than one million women between 60 and 62 are £32 a week worse off because of delays to their state pensions, according to a report by the Institute for Fiscal Studies (IFS).

While poverty rates among that group have risen sharply, the report said, the resulting savings, in combination with extra tax from working women, meant the state was £5.1bn a year better off.

The BBC quoted the government as saying its pensions policy was “fair and sustainable” and matched continuing rises in life expectancy, and the campaign group Waspi (Women Against State Pension Age Inequality) describing the research as shocking.

“Once again, this shows the government has implemented state pension age reforms without adequately considering the full impact of these changes on the women affected,” Waspi director, Jane Cowley told the BBC.

Between 2010 and 2016, the state pension age for women rose from age 60 to 63 and, according to the IFS study – Can’t wait to get my pension: the effect of raising the female state pension age on income, poverty and deprivation – the result is that 1.1 million fewer women are receiving a state pension while the government is providing £4.2bn less through state pensions and other benefits.

“This means affected households are receiving about £74 a week less in state pensions and other state benefits as a result of this change,” the IFS added.

“For women aged 60 to 62, who are now under the state pension age, the reform has also increased employment rates substantially, boosting the gross earnings of these women by £2.5bn in total. Across all 60 to 62 year old women – including those not in paid work – this is equivalent to an average of £44 per week.

“This – and the fact that employee National Insurance contributions are paid up to the (now higher) state pension age – has boosted government revenues by £0.9bn.”

Further pressure

IFS senior research economist and co-author of the report Jonathan Cribb said: “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.

“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. 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.”

He added: “More encouragingly, we find no evidence of increases in other measures of material deprivation. It is important the government communicates the ongoing increases in the state pension age clearly so families can plan for their retirement as well as possible.”

The changes were first introduced under the 1995 Pension Act that set out to equalise women’s state pension age to men’s at 65 years old.

In a House of Commons debate on the issue last month, MPs expressed anger at the way pension minister Guy Opperman answered calls for “transitional arrangements” for women affected by the move.