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Low earners ‘more likely to work more because of rising state pension age’

The state pension age increase has raised fears over equality.

Andra Maciuca by Andra Maciuca
2022-01-25 14:47
in News, Politics
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Low earners are more likely to work for longer than those who are better off because of the rising state pension age, research has revealed.

The latest increase in state pension age from 65 to 66 has caused those aged 65 to work an extra 1.8 million hours every week, according to the Institute for Fiscal Studies.

The state pension age increase happened gradually between 2018 and 2020, and by the middle of last year, male employment rate at age 65 rose to 42 per cent whilst female rate increased to 31 per cent.

Deprived areas versus wealthy areas

These are the highest increases since at least the mid-1970s and, for women, it is likely the highest rate increase ever in the UK, according to PA news agency.

The effects of the measure have raised fears over equality, with the IFS research pointing to women’s employment rate at 65 increasing by 13 percentage points in the most deprived fifth of areas.

For men, the increase in these poorer parts of Britain has been 10 percentage points.

By comparison, in the wealthiest areas of the UK, both women and men’s employment rates at 65 experienced a softer increase – four and, respectively, five percentage points.

‘They cannot afford to retire’

Jonathan Cribb, an associate director at IFS and an author of the report, said: “The sharp increases in employment have come in particular from those in poorer areas, and for those who have lower levels of education, suggesting that without a state pension they cannot afford to retire.”

Meanwhile, the government’s Department for Work and Pensions is awaiting a second independent review of the state pension age, carried out by Baroness Neville-Rolfe.  The IFS think their findings will be key evidence for the review.

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Because of the state pension age increase, an extra 5,000 people aged 65 are unemployed and jobseeking, and approximately 25,000 are out of work for long-term health reasons instead of being retired.

This prompted calls for the government to encourage those approaching state pension age to work part-time or more flexibly,

Laurence O’Brien, a research economist at IFS and another author of the report, said: “For most 65-year-olds, around 640,000 of them, a higher state pension age simply results in lower income rather than changing their work patterns.”

‘Further reforms are needed’

Emily Andrews, deputy director for evidence at the Centre for Ageing Better said: “With the state pension age set to rise further, the government must get serious about meaningful support to help workless people in their 60s get back into paid work.

“Otherwise, this policy will further harm those who are already disadvantaged by an ageist labour market.

“And now is clearly the time to consider seriously what further financial support should be offered to those for whom work simply is not an option.”

Phil Brown, director of policy at B&CE, provider of the People’s Pension, said: “The report’s findings provide further evidence that reforms to the automatic enrolment system are needed.”

Brown suggested measures the government could take include lowering the £10,000 earnings threshold to £6,240 for auto-enrolment, and “making contributions count from the first pound earned”.

A DWP spokesperson said: “Older workers are a huge asset to companies and our multi-billion pound Plan for Jobs and 50 Plus: Choices offer are supporting older workers across the country to retrain, build new skills and get into work.

“Raising state pension age in line with life expectancy changes has been the policy of successive administrations over many years.”

Related: Living costs worst since 1992 with inflation almost double the NHS pay rise

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