More than 250,000 additional people aged 60–64 are now living in relative income poverty compared with 2010, as state pension age increases take effect, according to a report from the Standard Life Centre for the Future of Retirement.
The report titled, ‘Jam Tomorrow? Work, finances and retirement in an era of a rising State Pension age’, outlines measures the government could adopt to mitigate the negative effects of a higher state pension age.
The report shows the poverty rate for this age group has risen from 16 per cent in 2009–10 to 22 per cent in 2023–24, representing the largest deterioration of any adult age group over the period and highlighting growing financial insecurity in the years before state pension access.
The report shows income poverty among 65-year-olds rose from 10 per cent to 24 per cent after the State Pension age increased from 65 to 66.
The report also finds that longer working lives have reduced some pressure, as employment among 64-year-olds increased from 34 per cent in 2013 to 54 per cent today. This improvement is concentrated among people already in work, leaving those who exit the labour market in their 50s and early 60s at greater risk of low income.
Further pressure is expected as the State Pension age rises again from next April, reaching 67 by 2028. The report calls on the government to reinvest part of the estimated £10bn a year in public spending savings into targeted support, including help to remain in work for longer and better guidance at the point of pension decumulation.
Standard Life Centre for the Future of Retirement Head of Research Analysis and Policy Patrick Thomson says: “For the first 60 years of its existence the State Pension age stayed the same. Since 2010 it has been rising in more years than not, and a growing number of people are falling into poverty as they wait for a higher State Pension age. Next year we will begin to see another rise from 66 to 67 which will save £10bn a year but have knock on costs and consequences for poverty levels.
“The change will come at a huge cost to some – our analysis shows over 250,000 additional 60–64-year-olds now in pre-retirement poverty compared with 2010, and the proportion of 65-year-olds in poverty more than doubled when the State Pension age moved from 65 to 66. Our research with the public shows that most people accept that the State Pension age may need to rise over time, but this needs to be done in a way that is seen as fair between generations. Any further increases must be matched by clear policies to help people stay in good work for longer and protect those who cannot.
“We know that there is a good chance that 66 year olds will see their rates of poverty double over the next few years unless we take action. We will spend £10bn less on them each year, and could target some of that to help people to stay in good work in their 60s and to cushion the impact on those most at risk. The State Pension matters to people, and we need to build public confidence in a fair system for today and for tomorrow”.
