State pensioners could receive “targeted support” to help “mitigate” the rise of state pension age. The state pension age will increase again from 66 to 67 between 2026 and 2028, making savings of around £6 billion per year for the new Labour Party government.
A new report on the means-tested benefit system around the state pension age, as part of The Pensions Review, led by the Institute for Fiscal Studies in partnership with the abrdn Financial Fairness Trust, suggests two ways in which targeted additional state support could help mitigate the effects of a higher state pension age for particularly vulnerable groups. The public finance cost of each of these targeted measures would be a fraction of the savings to the exchequer from increasing the state pension age.
It includes providing “additional support to those on universal credit” one year below the state pension age, so born around 1960 or 1961, and targeted increased support only at those receiving both universal credit and health-related benefits in the year before the state pension age.
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It comes as poverty rates among pensioners are highest among private renters (at 38%), and they are a growing group within the retiree population. Heidi Karjalainen, a Senior Research Economist at IFS and an author of the report, said: “Increasing the state pension age is a key policy to help the long-run sustainability of the public finances in the face of people living longer at older ages. But it does hit those on low incomes who are already not in paid work before the current state pension age particularly hard.
“Failing to support the most harmed groups risks undermining public confidence in the system and, in particular, the desirability of increases in the state pension age. There is a good case for using some of the savings resulting from a higher state pension age for targeted enhancements to working-age benefits for the most adversely affected groups in the run-up to state pension age.”
Mubin Haq, CEO of abrdn Financial Fairness Trust, said: “Levels of poverty amongst private renter pensioners are three times the rate amongst owner-occupiers, with the number living in the private rented sector set to rise significantly.
“Hardship is also high amongst social renters; however, the situation for private renter pensioners is particularly worrying. Not only are rents higher, and there is less security of tenure, but state support with housing costs for those on low incomes often fails to meet actual costs or needs and it doesn’t tackle the low availability of one-bedroom properties.
“Increasing housing benefit to allow for a second bedroom would better meet the real cost of private renting and provide much-needed space for carers and family to support older people with their increasing health needs.”