Phoenix Group calls for state pension reforms to prevent poverty from worsening as the state pension age increases.
The most recent study from Phoenix Insights a ground-breaking year-long study working with the public to understand their views and expectations of the state pension system served as the basis for An Intergenerational Contract: Policy Recommendations for the Future of the State Pension.
Physical and mental health issues as well as age discrimination are the main obstacles to working until retirement age as 51 per cent of UK adults intend to cease working before their state pension age.
The Cridland assessment suggests that the state pension increase to age 68 be advanced to 2037, which will have an effect on about 7 million people.
The think tank cautions that, in the absence of reforms, the combination of widespread undersaving and delayed access to state pension income creates a perfect storm for escalating poverty among people.
Recommendations include early access to the state pension for those with a terminal illness, the introduction of a means-tested bridging benefit, and a coordinated Sustainable Work Fund. These changes, and other proposals in the report, could be funded by reinvesting the equivalent of 20 per cent of the amount that the Treasury would save whenever the state pension age increases.
Phoenix Insights head of research and policy Patrick Thomson says: “The state pension is the biggest single part of the social security system and has been the foundation for many people’s retirement income over the last 75 years. However, looking ahead, it is facing serious questions of intergenerational fairness and affordability as large numbers reach retirement in the coming decades.
“Increasing the state pension age will mitigate some of the costs, but delaying access to state pension payments alongside the under-saving crisis creates a perfect storm for worsening poverty for those unable to remain in work until their late 60s.
“Policy interventions are needed in the years approaching state pension age so that more people aren’t dragged into financial hardship. We also need to radically change the way that we think about work, making it more sustainable and fulfilling, with better opportunities to upskill, change careers and save for a good retirement.
“The state pension is an important intergenerational contract, but not everyone knows what they’ve been signed up to. Our research shows that knowledge of the state pension is poor, and people are worried that they may not receive the same benefits as today when they reach their retirement age. Any changes to the system need to be effective, fair and trusted.”