The last state pension age rise enabled approximately £4.9bn of savings, according to Phoenix Insights, part of Phoenix Group,
Assuming a similar saving would be made by the next increase, the think tank said a reinvestment of 10 to 20 per cent, or £0.5bn-£1bn, would still enable a net gain for the exchequer of 80-90 per cent or £3.9bn-£4.4bn, in savings.
The most recent increase in state pension age went up from 65 to 66 and doubled poverty rates for the age group, resulting in over 65s losing state pension income worth around £142 per week in 2020/21.
Phoenix Insights director Catherine Foot, said: “Nearly half of the population rely on the state pension for the majority of their income later in life; to protect future generations of retirees from poverty, government needs to act now.
“Reinvesting just a fraction of the money saved by increasing the state pension age can help more people stay in work longer and support those for whom that is simply not feasible.”
In order to support those most negatively impacted by a rise, the think tank made several policy recommendations, including calling for greater investment into tailored job support and preventative health programmes, plus an engagement campaign to target those who will be impacted.
It highlighted the need to prepare and support people through the expected transition to a later state pension age, especially those facing health issues, redundancy or caring responsibilities which can make it more difficult to work in the five years leading up to state pension age.
It also recommended a programme of support from mid-life onwards, including mid-life MOTs, age-inclusive campaigns, access to lifelong learning and preventative health at work programmes.
Foot added: “We know people worry that health issues, caring responsibilities and having the right skills will prevent them from working for longer – so it’s clear that raising the state pension age without a plan to help people earn or save more is a recipe for disaster.
“Living longer is one of the greatest gifts of the 21st century, but it’s one the UK really needs to plan for.”
No state pension
Phoenix Insights’ new report, Reaching a certain age: Public attitudes to the state pension, found people believe the state pension is there to ensure everyone has a minimum level of income in retirement (87 per cent) and to support older people who are unable to work (82 per cent).
Despite 84 per cent of people believing that providing the state pension is an essential role for government, one in three (34 per cent) think that there probably will not be a state pension by the time they retire, including half of 18-24s (49 per cent) and over half of 25-49 year olds (53 per cent).
Phoenix Insights warned that without action, moving the goalposts again will leave many in a worse position.
A DWP spokesperson said: “We know that older workers, including those approaching state pension age, are a huge asset to our economy while for those who can’t work, we provide a strong welfare safety net, which includes universal credit.
“An independent review concluded that a universal state pension age remained the best system, providing simplicity and clarity to enable people to plan for retirement. The government remains committed to this.
“We also understand that people are struggling with rising prices which is why we have acted to protect millions of the most vulnerable through at least £1,200 of direct payments this year, and there is a wealth of additional financial support available when people reach state pension age, including Pension Credit – which unlocks an additional £650 cost of living payment for those currently claiming it - and Winter Fuel Payments.”
The report also found the public considers health (65 per cent), individual circumstances (64 per cent) and ability to do the job (61 per cent) factors that should determine when a person stops working.
Less than one in 10 people (9 per cent) said that age should be the main factor determining when you stop working.
Around 76 per cent of people support the idea of early access to the state pension for people who are unable to continue to work, for example due to health reasons and 69 per cent believe that the government should 'top-up' the incomes of low-income pensioners, to make sure that they have a reasonable standard of living.
Conservative voters (61 per cent) were more likely than Labour voters (56 per cent) to agree that with people living longer, we should be prepared to pay more taxes to properly fund state pensions.
sonia.rach@ft.com
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