DWP issued state pension warning hours after major announcement | Personal Finance | Finance

A non-profit that tackles inequality in ageing has issued a major warning to the Government after it announced the next review of the state pension age. Ministers are required to review the state pension age every six years, but this latest review will begin earlier than expected, as the last one only concluded in 2023.

The new review will look at whether the current pension age of 66 remains appropriate, considering factors like life expectancy. The move follows warnings that people retiring in 2050 could get £800 less per year than pensioners of today.

Elaine Smith, Interim Deputy Director for Work at the Centre for Ageing Better, was positive about the the Government’s willingness to address the issue, though she urged the Department for Work and Pensions (DWP) to do a “holistic review of its approach for people in their 60s” to understand potential impacts.

Ms Smith said: “We welcome the government’s intentions in announcing steps designed to raise pension saving, tackle pensioner poverty and ensure that outcomes in retirement are more equitable.

“But, while it is important that there is a long-term focus to pensions adequacy reforms so people have sufficient time to plan in accordance, this must not come at the expense of tackling the issues facing many older people today.”

She said the issue needs to be handled with “supreme care and attention” with “difficult choices to balance here” and warned that “getting it wrong can come with a heavy price”.

“The last time the state pension age rose, nearly 100,000 more 65-year-olds were pushed into poverty while waiting to collect their state pension, with poverty rates for this age group doubling in the wake of the rise,” Ms Smith continued.

She said “reform or review of pensions in this country must recognise that the traditional retirement cliff-edge, where people moved directly from full-time work to no work, is no longer the case for the majority” and that Government policy “needs to catch up with this fundamental change”.

“Before any further changes are made to the state pension age, the government should undertake a holistic review of its approach for people in their 60s so that policy better reflects the needs of this changed reality,” Ms Smith added.

“This could include considering whether the state pension age should be a red line for collecting pensions and ineligibility for working age benefits.

“The current inflexibility does not reflect the circumstances of people either forced out of the labour market a decade before state pension age because of ageism or health concerns or those who have to seek work beyond state pension age to make ends meet.”

Announcing the move, the Government department said 45% of working-age adults weren’t putting anything into their pensions, while a staggering 15 million are estimated to be “undersaving”. The self-employed, low-paid and some ethnic minorities are reported to be particularly affected.

Work and Pensions Secretary Kendall said she was “under no illusions” about how difficult it would be to map out plans for pensions for the coming decades amid cost-of-living pressures.

She conceded that “many workers are more concerned about putting food on the table and keeping a roof over their heads than saving for a retirement that seems a long, long way away, and many businesses face huge challenges in keeping profitable and flexible in an increasingly uncertain world”.

The move comes only weeks after financial think tank the Institute for Fiscal Studies (IFS) warned that the state pension age may need to rise to 74 by 2068 due to financial challenges  compounded by an increased life expectancy rate.

In a speech in west London today (July 21), Ms Kendall also announced that she would revive the Pension Commission to “tackle the barriers that stop too many saving in the first place”.

She said: “Just because pensioner poverty has fallen does not mean all the problems have gone away. Far from it. Women who are now approaching retirement have half the private pension wealth of men, so the average woman in her late 50s can expect a private pension income of just over £100 a week, compared to £200 a week for men.

“Only one in five of the self-employed are saving into a private pension, down from half in the late 1990s, meaning over three million self-employed people aren’t saving anything at all for their retirement.”

Ms Kendall said young people, in particular, were struggling to save for retirement due to soaring housing costs.

The Cabinet minister said young people “haven’t got a hope in hell of getting on the housing ladder” and were being “killed by rent” – which she said was driving a “tsunami of pensioner poverty”.

The previous commission, which last met in 2006, recommended automatically enrolling people in workplace pensions, which has seen the number of eligible employees saving rise from 55% in 2012 to 88%.

It will be led by Baroness Jeannie Drake—a member of the previous commission— and is expected to deliver recommendations on ways to increase retirement income in 2027. The proposals are set to extend beyond the next election.

The state pension age for men and women is currently planned to rise to 67 between 2026 and 2028, followed by a further increase to 68 between 2044 and 2046.

The new review could see this brought forward to address concerns about low levels of saving and cost of living pressures, as per ITV News.

A DWP spokesperson said: “We are committed to supporting pensioners, and thanks to our commitment to the Triple Lock, millions will see their yearly State Pension rise by £1,900 this parliament, and following the biggest-ever campaign to boost Pension Credit take-up, nearly 60,000 extra pensioners are now receiving financial support worth up to £4,300 a year.