Allowing certain groups early access to their state pension could benefit a quarter of a million people who may otherwise miss out, a joint paper from the Pensions Policy Institute (PPI) and Age UK has claimed.
The paper argued people from certain geographic areas and socio-economic classes are unlikely to live to the increased state pension age.
Improvements in life expectancy have led to a rise in the state pension age, which is currently on track to reach 67 by 2028 for both genders. Yet the paper points out how, in central Glasgow, for example, healthy life expectancy at birth is just 55.9 years for men and 58.5 years for women – well below the current state pension age of 65.
Manual workers, people with caring responsibilities and women approaching their sixties are likely to be hardest hit by increases to the state pension age, the paper said.
The Women Against State Pension Inequality or ‘WASPI’ movement has claimed hundreds of thousands of women have had significant pension changes imposed on them without appropriate notification while Age UK has been lobbying the government to consider the implications of extending the retirement age on disadvantaged and vulnerable groups.
The charity has argued the state pension age should not be based purely on life expectancy alone on the basis socio-economic classes are widening and life expectancies vary greatly between different areas of the UK.
PPI senior policy analyst and author of the briefing paper John Adams said: “With increasing life expectancies in the UK, it is understandable the government might wish to increase state pension age, but care should be taken to recognise the impact on people who may be unable to continue in work, for example, as a result of health issues or caring responsibilities.”
The PPI paper put forward four potential policies that could reduce the effects of the rising state pension age on more vulnerable people. The first, which has already been implemented in Germany, is to give people who have contributed for more than 45 years early unreduced access to their state pension.
The second option is to separate pension credit and the state pension age, which means people would still receive pension credit at 65. People eligible for this scheme would be most likely on low incomes who are not working as they approach the state pension age.
Option three would involve granting early access to a reduced state pension to compensate for the fact the pension will be paid for a longer time. Countries such as the US and Canada have allowed early access to their state pension scheme.
The final option targets specific groups, allowing, for example, people with disabilities or caring responsibilities early access. The idea behind this option is to help people who cannot work longer due to their circumstances.
Hardship for many
Age UK charity director Caroline Abrahams said it is already known that increasing the state pension age based on average life expectancy would cause hardship for many people.
She said: “It is, of course, reasonable to consider raising the state pension age as overall life expectancy goes up – but as a blanket approach, it risks leaving many people facing serious problems in later life through no fault of their own.
“In fact, as the state pension age climbs ever higher, many of those with lower life expectancies – who are also likely to be on lower incomes – may end up with little or no time left in retirement.”
Abrahams urged the government to consider all the options before making further changes to the state pension age, adding: “Increasing the state pension age for everyone, regardless of caring responsibilities or health and employment opportunities, seems unfair and penalises thousands of people at a time in their lives when they most need support. As this research shows, there are a number of ways to help the many thousands of people who are, for whatever reason, unable to work into their late sixties.”
Commenting on the report, Aegon UK pensions director Steven Cameron said: “As the state pension age increases, there is a pressing need to offer solutions to those who are simply unable to continue working well into their 60s.
“This report acts as a timely reminder that while, on average, UK citizens are living longer, there are significant differences across the population – particularly in terms of how long people can expect to remain in good health.”
He added: “While the recent pension freedoms allow those with defined contribution pensions to access their pension from the age of 55, more can still be done. The government offering everyone access to their state pension from a lower age, at a reduced rate to balance the costs, would be a welcome step forward and could provide much-needed support.
“We also see merit in granting an unreduced state pension once an individual has paid 45 years of National Insurance contributions. Offering special terms to those meeting other health criteria would, however, be difficult to police and could potentially become divisive.”
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