Nearly 100,000 65-year-olds fell into poverty as the state pension age rose from 65 to 66, depriving them of an income of £142 per week as the government saved £4.9bn.
According to research by the Institute for Fiscal Studies (IFS) the latest increase in state pension age from 65 to 66 meant that the absolute income poverty rate for 65-year-olds rose by 14 percentage points, or nearly 100,000 people, to reach 24% by late 2020.
The higher state pension age also encouraged around 9% or 60,000 more 65-year-olds to stay in their job and retire later.
The less well educated, those in rented accommodation and single people were hardest hit by the increase.
The income poverty rate of 65-year-olds with at most GCSE-level education rose by 21 percentage points, from 14% to 35%.
Among 65-year-old renters, the income poverty rate rose by 24 percentage points, from 22% to 46%.
With lower state benefits and higher tax revenues from employment, the increase in state pension age from 65 to 66 boosted the public finances by £4.9bn per year, equivalent to around a quarter of 1% of national income, or 5% of annual government spending on state pensions.
“Increasing the state pension age is a coherent government response to increases in life expectancy at older ages and the resulting pressures on the public finances,” Laurence O’Brien, a research economist at IFS and an author of the report, said.
“But it does weaken household budgets. We find that 14% of 65-year-olds were in income poverty in late 2020 as a direct result of the state pension age rising from 65 to 66, with this concentrated amongst renters, single people and those with lower levels of education.”
The increase between late 2018 and 2020 also mean that the approximately 700,000 65-year-olds in the UK had to wait another year before they could receive a state pension.
“These statistics are shocking and show that the number of 65-year-olds in absolute poverty rose from one in ten before the state pension age increase to almost one in four just two years later,” Emily Andrews, deputy director for Work at the Centre for Ageing Better, said.
“The severity of this situation means it is crucial the government gets serious on improving access to work for people in their 60s: investing in tailored employment support for those out of work, expanding access to occupational health support, and bringing flexible work and carer’s leave proposals into legislation,” she added.
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