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.