Raising the State Pension age for women to 63 has left 1.1 million women worse off, a new study from the Institute of Fiscal Studies has revealed. From 2010 to 2016 the State Pension age for women was raised from 60 to 63. This resulted in a boost to the public purse – but left households £74 a week less off, a significant sum in retirement.
Government finances have benefited by £5.1 billion a year from the move the IFS revealed, thanks to the cash saved in fewer State Pension and other benefit handouts – and the extra income taxes generated by women having to work for longer as a result of the measures.
“The falls in household incomes caused by the reform have pushed income poverty among 60 to 62 year old women up sharply to 21.2%, compared to a pre-reform poverty rate among women of this age of 14.8%,” the report reads.
The female State Pension age will continue to rise, hitting 65 by 2018. The threshold for both men and women will rise again to 66 by 2020.
Caroline Abrahams, Charity Director at Age UK, said it was extremely worrying that the rise in women’s State Pension age had pushed some women into poverty.
“While it may have encouraged a number to work longer, many women in their sixties were simply not aware of the rise and, as was predicted by experts, they have either had too little time to make adequate preparations or have been unable to continue working due to ill health, caring responsibilities or unemployment,” she continued.
“Going forward, we are very concerned that millions of women and men in their late fifties and early sixties today will have to wait longer for their State Pension than they had reasonably hoped and expected, forcing them onto a benefits regime that was not really designed for them, or into a position in which they have to draw down savings put away to see them through their retirement.”
FTSE 100 Companies Fall Short of Pension Obligations
There has been bad news in the private pension sector today also. A report from LCP Accounting for Pensions has shown that over the past decade, FTSE 100 companies have paid £150 billion into their defined benefit (DB) pension schemes, but despite this their accounting position has worsened.
Ten years ago, the schemes were collectively running a £12 billion surplus. Today, firms are running a £17 billion deficit. This is in part due to a fall in bond yields, which have failed to generate sufficient income for scheme members.
Graham Vidler, of the Pensions and Lifetime Savings Association said that the report proved the current DB system is not fit for the future.
“The need to pay for past promises could divert employer resources away from the investment necessary to ensure their firms’ future. Despite this, these firms are running to stand still as deficit levels remain stubbornly high and members of schemes whose employers are most under pressure have just a 50:50 chance of seeing benefits paid in full,” he said.
“The current system is not fixing itself as it is too fragmented, manages risk inefficiently and has a rigid approach to benefits.”
According to the Office for National Statistics, active membership of private sector defined benefit schemes sits at 1.6 million. Defined contribution (DC) schemes have seen a surge in popularity in recent years due to auto-enrolment. According to the Pensions Regulator, 55% of all private sector workplace pension members are in DC schemes, and 86% of all those currently saving are investing into a DC scheme. It is predicted that by next year there will be 10 million workers saving into a DC pension scheme.
