The cross-party Work and Pensions Committee has backed calls for the Government to increase Universal Credit for 66-year-olds to prevent hardship as the State Pension age rises to 67, in a report published yesterday.
Temporary support urged for pre-pensioners
The Transition to State Pension Age report, says the Government should consult on the change with a view to implementing it by the end of 2026 as a temporary measure, allowing time to develop longer-term support.
The State Pension age is already being gradually increased and will reach 67 by April 2028. A growing number of 66-year-olds may have to rely on the £425-a-month standard rate of Universal Credit for longer, despite worsening health. Pension Credit, which guarantees £1,031 a month, is only available once they reach State Pension age.
This leaves many pre-pensioners, particularly those with health issues, caring responsibilities or long histories in labour-intensive jobs, relying on the savings they may have set aside for retirement until they reach the State Pension age.
Rising poverty and uneven health outcomes
The Committee warns that when the State Pension age last rose in 2020, poverty more than doubled among people in the year approaching it, rising from 10% to 24%, putting 100,000 below the poverty line. With people now waiting a further year, and many already frail, the “impact is likely to be greater this time”.
Meanwhile, only 42% of 66 year-olds are in paid work, while almost a quarter (24%) of the poorest 60-65 year-old pre-pensioners are working while frail, which research has shown deepens health problems.
Giving further support through Universal Credit to 66-year-olds would cost £600 million of the potential £10.5 billion savings made from the rise. While the impact on efforts to boost employment may be a consideration, the report says, “impact on work incentives being outweighed by the imperative to reduce poverty”.
Concerns over outdated evidence base
In the report, MPs on the Committee raise concerns about “poor policymaking”, after hearing that the most recent impact assessments for the State Pension age increase are more than a decade-old (2011 and 2013), and none are planned until after the rise is complete. This has caused a “significant gap in the Government’s understanding” of the impact of the rise.
They added that “an opportunity to inform mitigations has been missed” after the Government failed to act on committee recommendation last year in its Pensioner Poverty report to conduct an impact assessment ahead of the State Pension age rise.
Work and Pensions Committee Chair Debbie Abrahams said: “We can’t just allow people who are already struggling as they approach pension age to be forced to choose between continuing work in poor health or prolonging their poverty as they wait for their State Pension to kick in.
“This is not the later life that anyone wants or to see their loved ones endure after providing for decades.
“We should recognise that pre-pensioners have greater needs and greater barriers into employment due to ill-health, age discrimination, lack of opportunity to upskill. More than half of people are not in paid work in their mid-60s, and they’re not likely to get it if they’ve been effectively written off.
“Additional social security payments are essential in reducing the compounding effects of the lottery of life and the state pension age increase.
“The harm has already been done for some planning retirement if policymakers are using out-dated impact assessments in making the changes they are. As a result, we know there will be an impact, but we don’t know how big it will be.
“But it’s not too late; if the Government takes action quickly those who face poverty because they deplete their savings before reaching pension age can be helped.”