Rise in pension age has left 1m women £32 a week worse off

MORE than a million women are on average around £32 a week worse off as a result of the increased state pension age, according to a leading think-tank.

The Institute for Fiscal Studies found the rise in the threshold from 60 to 63 between 2010 and 2016 has saved the Government billions, but is hitting the household incomes of women affected.

It said the change has also ‘sharply’ increased the number of older households on low incomes.

Although the reform has boosted employment, as more women are forced to stay in work, the IFS concluded the extra wages are not making up for the potential pension income they would have received.

Some 1.1million fewer women are able to claim state pension as a result of the change. Affected households are receiving an average of £74 a week less in pensions and other benefits, while the Government is saving £4.2billion a year. The increased employment rate among women aged 60-62 has only boosted their earnings by £2.5billion a year in total. This equates to an average of just £44 a week for these women.

Because of this, the IFS report said that increasing the state pension age from 60 to 63 has reduced the net household income of women aged 60-62 by an average of £32 per week. Meanwhile, the Government has generated an extra £900million of tax revenue per year.

A couple with no children and an income after tax and benefits of less than £237 a week are classed as living in poverty.

The poverty rate of women aged 60-62 has risen from 14.8 per cent to 21.2 per cent, according to the IFS report.

The state pension age is being raised for women and men as rising life expectancy has made it increasingly unaffordable.

But Jonathan Cribb, a senior research economist at the IFS and one of the report authors, said: ‘The tax and benefit system is much more generous to those above the state pension age than those below it. 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.’

The report from the IFS comes amid warnings that more than seven million people in their 30s and 40s will lose out by £10,000 each under plans to increase the state pension age earlier than planned.

People born between 1970 and 1978 will have to wait until they are 68, an extra year, before receiving payments, Work and Pensions Secretary David Gauke announced last month.

Recent analysis by the Commons Library found the £74billion that the move will save works out as £9,800 per person on average across the 7.6million hit by the change.

Under current plans, the state pension age for both sexes will be 65 by the end of 2018, rising to 66 in 2020 and 67 in 2028.