A report out today suggests targeted support in means-tested benefits could ease impacts of a higher state pension age on vulnerable groups.
The Pensions Review, led by the Institute for Fiscal Studies in partnership with the abrdn Financial Fairness Trust, suggests two ways in which targeted additional state support could help mitigate the effects of a higher state pension age for particularly vulnerable groups.
The state pension age will increase again from 66 to 67 between 2026 and 2028. This will yield substantial savings (around £6 billion per year) for the public purse, but will also disproportionately hit many low-income people, in particular those who already struggle to remain in paid work until the current state pension age.
The public finance cost of each of these targeted measures would be a fraction of the savings to the exchequer from increasing the state pension age.
Heidi Karjalainen, a Senior Research Economist at IFS and an author of the report, said:
‘Increasing the state pension age is a key policy to help the long-run sustainability of the public finances in the face of people living longer at older ages. But it does hit those on low incomes who are already not in paid work before the current state pension age particularly hard.
‘Failing to support the most harmed groups risks undermining public confidence in the system and, in particular, the desirability of increases in the state pension age. There is a good case for using some of the savings resulting from a higher state pension age for targeted enhancements to working-age benefits for the most adversely affected groups in the run-up to state pension age.’
