New £600m benefit plan for 66-year-olds trapped by state pension change | Personal Finance | Finance

A cross-party committee has called for a £600million plan for the Government to temporarily increase Universal Credit for 66-year-olds facing hardship due to phased increase of the State Pension age to 67.

On Saturday (July 11) the Work and Pensions committee published The Transition to State Pension Age report, which says the Government should consult on the change with a view to implementing it by the end of this year as a temporary measure, to provide time to develop longer-term support. The State Pension age is already in the process of being gradually increased and will reach 67 by April 2028, the committee notes.

As a result, the growing number of 66-year-olds may have to rely on support provided in the form of the £425-a-month standard rate of Universal Credit for longer, despite facing worsening health.

Pension Credit, which can hand claimants £1,031 a month, is only available to those of State Pension age, meaning many pre-pensioners, particularly those with health issues, caring responsibilities or long histories in labour-intensive jobs, are forced to rely on the savings they may set aside for their post-work years until State Pension-related support kicks in, the committee warns.

The MPs said when the last State Pension age rise took effect in 2020, poverty more than doubled among people in the year approaching it, increasing from 10% to 24%, with 100,000 people put below the poverty line.

But with people now waiting a further year, many of whom are already frail, the “impact is likely to be greater this time”, they added.

The committee said it comes as just 42% of 66 year-olds are in paid work, while 24% of the poorest 60-65 year-old pre-pensioners are working while frail, which research has shown only deepens health problems.

The report estimates that giving further support through Universal Credit to 66-year-olds would cost £600 million of the potential £10.5 billion savings the State Pension age rise is expected to bring for the Treasury.

The MPs say while the impact on efforts to boost employment may be a consideration, the “impact on work incentives” is “being outweighed by the imperative to reduce poverty”.

The report raised concerns about “poor policymaking”, after hearing that the most recent impact assessments for the State Pension age increase are more than 10 years old (2011 and 2013), and says there currently isn’t set to be another until after the rise is complete.

The MPs say this has resulted in a “significant gap in the Government’s understanding” of what impact the rise will have.

They claimed that “an opportunity to inform mitigations has been missed” after the Government failed to act on committee recommendation last year in its Pensioner Poverty report to conduct an impact assessment ahead of the State Pension age rise.

Labour MP and Committee Chair Debbie Abrahams said, “We can’t just allow people who are already struggling as they approach pension age to be forced to choose between continuing work in poor health or prolonging their poverty as they wait for their State Pension to kick in.

“This is not the later life that anyone wants or to see their loved ones endure after providing for decades.

“We should recognise that pre-pensioners have greater needs and greater barriers into employment due to ill-health, age discrimination, lack of opportunity to upskill. More than half of people are not in paid work in their mid-60s, and they’re not likely to get it if they’ve been effectively written off.”

“Additional social security payments are essential in reducing the compounding effects of the lottery of life and the state pension age increase.

“The harm has already been done for some planning retirement if policymakers are using out-dated impact assessments in making the changes they are. As a result, we know there will be an impact, but we don’t know how big it will be. But it’s not too late; if the Government takes action quickly those who face poverty because they deplete their savings before reaching pension age can be helped.”

A DWP spokesperson said: “We welcome the Work and Pensions Select Committee inquiry on the transition to State Pension age and will consider their report and recommendations in due course.