MPs call for increased Universal Credit support as State Pension age rises
The Government should increase Universal Credit payments for people aged 66 to help prevent financial hardship as the State Pension age rises to 67, according to a cross-party group of MPs.
In its Transition to State Pension Age report, the Work and Pensions Committee recommends that the Government consult on providing additional support, with a view to introducing a temporary measure by the end of 2026.
The State Pension age is gradually increasing and is due to reach 67 by April 2028. As a result, a growing number of people aged 66 could be required to rely on Universal Credit for longer before becoming eligible for the State Pension and Pension Credit.
The Committee said the standard Universal Credit payment is around £425 a month, compared with Pension Credit, which guarantees an income of approximately £1,031 a month once a person reaches State Pension age.
MPs warned that this gap could disproportionately affect people experiencing poor health, those with caring responsibilities and individuals who have spent much of their working lives in physically demanding jobs.
Some people may also be forced to use savings intended for retirement while waiting to become eligible for pension support.
Poverty concerns among pre-pensioners
The report highlights evidence from the previous increase in the State Pension age in 2020, when poverty among people in the year immediately before pension eligibility more than doubled from 10 per cent to 24 per cent.
This was estimated to have pushed approximately 100,000 additional people below the poverty line.
The Committee warned that the impact could be greater during the latest increase, as people are required to wait an additional year and many may already be living with frailty or long-term health conditions.
Only 42 per cent of people aged 66 are currently in paid employment, according to the report. It also states that almost one-quarter of the poorest people aged between 60 and 65 are continuing to work while experiencing frailty, which could contribute to deteriorating health.
Providing increased Universal Credit support to people aged 66 would cost an estimated £600 million, compared with the potential £10.5 billion in savings associated with raising the State Pension age.
Although the Committee acknowledged that higher payments could affect incentives to remain in employment, it said the need to reduce poverty should take priority.
MPs criticise outdated impact assessments
The Committee also raised concerns that the most recent impact assessments relating to the State Pension age increase were produced in 2011 and 2013.
MPs said no further assessment is currently expected until after the increase has been completed, leaving a significant gap in the Government’s understanding of how the change will affect people approaching retirement.
The Committee previously recommended that an impact assessment should be conducted before the increase as part of its Pensioner Poverty report.
It said the failure to carry out that work meant an opportunity to identify and introduce appropriate measures had been missed.
Work and Pensions Committee Chair Debbie Abrahams said people should not be forced to choose between continuing to work while in poor health or remaining in poverty while waiting to receive their State Pension.
She commented: “We should recognise that pre-pensioners have greater needs and greater barriers into employment due to ill-health, age discrimination and a 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.”
She added that additional social security payments would be essential to limit the financial consequences of the State Pension age increase.
Ms Abrahams continued: “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.”
Responding to the Committee’s report, Dr Andrea Barry, Deputy Director for Work at the Centre for Ageing Better, welcomed its findings and urged the Government to take urgent action.
She said: “We really welcome the Committee’s excellent report and hope it causes the Government to step up and take urgent action to tackle an entirely foreseeable increase in poverty caused by another rise in the State Pension age.
“Our own work has shown what a financially troubling time the 60s can be for a sizeable minority in this country. For millions of people, the years before State Pension age are full of uncertainty and worry, where poor health, caring responsibilities, barriers to working and lifelong inequalities can throw out long-held dreams of a financially secure retirement.
“Poverty peaks just before State Pension age, and the previous increase in the State Pension age to 66 doubled poverty levels among those on the cusp of that age. The Committee has warned that, this time, the increase in poverty could be even greater.
“The Government should have been prepared for this, but it is still not too late to address the issue, as the Committee makes clear. It is vital that the Government protects people affected by the current rise in the State Pension age by introducing urgent, targeted measures.
“We suggested a range of potential measures to the Committee and wholeheartedly support its call to increase Universal Credit for 66-year-olds to prevent hardship. Providing further support through Universal Credit would cost £600 million, a small fraction of the £10.5 billion in savings the Treasury expects to make from the State Pension age increase.
“What is being proposed by the Committee is a short-term measure to alleviate the immediate issue. In the longer term, and well before any future increases in the State Pension age, the Government needs to take a joined-up approach across pensions, work, benefits and health to ensure that the mid-60s does not become a period of heightened financial insecurity for growing numbers of older people.
“This will require employment and skills reforms that take account of the needs of older people, alongside improved careers guidance, financial planning advice for older workers and stronger support for those living with health conditions.
“At present, too many people are being left to sink or swim as they approach State Pension age.”
