State pension age increase hands government more than £5bn a year

 
Helen Cahill
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UK General Election 2015 - Miscellaneous Week One
The state pension age was raised last year (Source: Getty)

The increase in the state pension age for women has brought in an extra £5.1bn a year to government finances but has placed a financial burden on 1.1m women.

The state pension age for women rose to 63 between 2010 and 2016, meaning the government has saved £4.2bn on pension and benefit costs, according to analysis released today by the Institute of Fiscal Studies (IFS).

Read more: What we need to do to bring state pension age down

The employment rate for women aged between 60 and 62 has subsequently increased, boosting the earning of this group by £2.5bn, equivalent to a gross income increase of £44 per week.

This, combined with the associated increase in the national insurance contributions, has lifted government revenues be a further £0.9bn.

However, affected households receive £74 a week less in state pensions and benefits.

Accounting for taxes and the individual circumstances of the women affected, the IFS calculated they would be worse off by an average of £32 per week.

Read more: What will Osborne do to pensions next?

Jonathan Cribb, senior research economist at the IFS, said: "The increased state pension age is boosting employment – and therefore earnings – of affected women but this is only partially offsetting reduced incomes from state pensions and other benefits.

"Since both rich and poor women are losing out by, on average, roughly similar amounts the reform increases income poverty rates among households containing a woman who has reached age 60 but has not yet reached her state pension age."

A spokesperson from the Department for Work and Pensions said: “The decision to equalise and increase the state pension age is both fair and sustainable for future generations and in line with continuing rises in life expectancy.

“Women retiring today can still expect to receive the State Pension for over 24.5 years on average – which is more than any generation before them and several years longer than men."

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