One million UK women could be worse off due to retirement age changes

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One million UK women could be worse off due to retirement age changes

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Author Lauren Howells

A new report by the Institute for Fiscal Studies (IFS) has revealed that more than a million women are, on average, £32 a week worse off due to changes to the state pension age.

The same study found that the increase in women’s pension age, from 60 to 63 between 2010 and 2016, had hit those households with lower incomes hardest, whilst reportedly saving the government over £5 billion in 2015/2016.

The state pension age and lower income families

Those households with lower incomes were losing out by, on average, around the same amount as richer households. This means that the proportion of income lost by lower income households, under these changes, would, in fact, be much larger than the proportion of income lost by higher earners.

According to the IFS, the absolute income poverty (those who fall below the 60% median household income)  rate of women aged between 60 and 62 years old (now under the state pension age), increased by 6.4 percentage points, because of these reductions in income.

However, the IFS also found that this increased risk of poverty didn’t persist beyond the point when state pension age is reached.

No evidence was found to suggest that the state pension age increasing would, in turn, increase the probability of women reporting that they were being deprived of important material items. The report said that this may be because they had “smoothed out their consumption”.

According to Jonathan Cribb, IFS senior research economist and the author of the report:

“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 went on to say that while the increased state pension age was boosting employment (and therefore earnings) of the women who have been affected, this would only partially offset reduced incomes from state pensions and other benefits.

lower income families and the state pension age

According to an article in The Independent, some have criticised the way the government has managed the reforms, with Women Against State Pension Inequality (Waspi) Director, Jane Cowley, saying that women are yet again paying the price for the government’s pension reforms.

A spokesperson for the Department for Work and Pensions reportedly said:

“The decision to equalise and increase the state pension age is both fair and sustainable for future generations and in line with continuing rises in life expectancy. Women retiring today can still expect to receive the state pension for over 24.5 years on average – which is more than any generation before them and several years longer than men.”  

“By 2030, more than three million women stand to gain an average of £550 extra per year as a result of the new state pension.”

What age will I be able to get my state pension?

For the last few years, the government has been working towards women and men drawing their pensions at the same age.

Now, men can claim their state pension at 65 years old, whereas women only need to wait until they are 63.

Over the next few years, the age that people can access their state pensions will rise. In 2020, women and men will have to wait to claim their state pensions until age 66. By 2028, this will rise to 67 years old and then eventually, the age will rise to 68 for both men and women.

By | 2018-05-30T10:09:39+00:00 August 4th, 2017|Personal Finance|0 Comments

About the Author:

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After completing her law degree, Lauren decided to follow her passion for writing. She regularly contributes articles to CLNews on personal finance and general consumer topics.

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