Around one in seven 65-year-olds were in income poverty in late 2020 due to the state pension age rising from 65 to 66.
A key effect of the rise, between late 2018 and late 2020, was that 65-year-olds missed out on pension income of £142 per week on average, said the Institute for Fiscal Studies think-tank.
The rate of absolute income poverty – less than £260 per week for a couple without children – for those this age rose by 14 percentage points to 24 per cent by late 2020. Emily Andrews, of the Centre For Ageing Better which funded the research, said: ‘It is crucial the Government gets serious on improving access to work for people in their 60s.
The report said: ‘The reform caused absolute income poverty rates (after accounting for housing costs) among 65-year-olds to climb to 24 per cent, some 14 percentage points higher than – or more than double – the 10 per cent, that we estimate it would have been had the state pension age remained at 65.’
Laurence O’Brien, a research economist at IFS and an author of the report, said: ‘We find that 14 per cent of 65-year-olds were in income poverty in late 2020 as a direct result of the state pension age rising from 65 to 66, with this concentrated amongst renters, single people and those with lower levels of education.’
The IFS said that due to increasing the state pension age from 65 to 66, the income poverty rate of single people aged 65 rose by 22 percentage points, from 16 per cent to 38 per cent and the rate for 65-year-old renters rose by 24 percentage points, from 22 per cent to 46 per cent.
Associate director at IFS and the other author of the report, said: ‘The rise in the state pension age led to a bigger increase in income poverty’
With lower state benefits and higher tax revenues from employment, the increase in state pension age from 65 to 66 boosted the public finances by £4.9billion per year, equivalent to around a quarter of 1 per cent of national income, or 5 per cent of annual government spending on state pensions, the IFS said.
The state pension age is regularly reviewed.
Jonathan Cribb, an associate director at IFS and the other author of the report, said: ‘The rise in the state pension age to 66 led to a bigger increase in income poverty rates than was caused by previous increases in the female state pension age.
‘This is due to the growing gap in the generosity of financial state support between those above and below the state pension age, as well as the fact that people in their mid-60s are less likely to be in employment and therefore more dependent on the state pension for income than those in their early 60s.
‘A key takeaway for policymakers is to ensure the working-age benefit system appropriately supports those approaching the state pension age, with this being increasingly important as the state pension age increases further.’
Emily Andrews, deputy director for work at the Centre for Ageing Better, said: ‘These statistics are shocking and show that the number of 65-year-olds in absolute poverty rose from one in 10 before the state pension age increase to almost one in four just two years later.
‘The severity of this situation means it is crucial the Government gets serious on improving access to work for people in their 60s: investing in tailored employment support for those out of work, expanding access to occupational health support, and bringing flexible work and carer’s leave proposals into legislation.
‘But even if the Government can deliver all this, for those who are unable to access work, the raising of the state pension age will leave them poorer – and in many cases, actually impoverished.
With lower state benefits and higher tax revenues from employment, the increase in state pension age from 65 to 66 boosted the public finances by £4.9billion per year
‘What this research tells us is that further increases in the state pension age must be accompanied with a holistic review of how our social security system supports us as we age, and how to mitigate the hardship awaiting those whose ability to work is compromised in the years before they reach pension eligibility.’
A Department for Work and Pensions spokesman said: ‘We know that older workers, including those approaching state pension age, are a huge asset to our economy while for those who can’t work, we provide a strong welfare safety net, which includes Universal Credit.
‘We also understand that people are struggling with rising prices which is why we have acted to protect millions of the most vulnerable through at least £1,200 of direct payments this year, and there is a wealth of additional financial support available when people reach state pension age, including Pension Credit – which unlocks an additional £650 cost of living payment for those currently claiming it – and Winter Fuel Payments.’