A new study carried out by the Organisation for Economic Co-operation and Development (OECD) has suggested that the UK state pension is the ‘least generous’ of all the most advanced economies in the world.
The OECD suggested that the average retiree can expect to receive only 29% of what they earned from working. It also revealed that the level of poverty amongst older individuals in the UK is significantly high, due, in part, to the low level of the state pension.
However, if ‘voluntary’ pensions, such as workplace pensions, are taken into account, the average UK pensioner is likely to receive 62% of their working income – lower than the average for other OECD economies, which currently sits at 69%.
The Trades Union Congress (TUC) has urged the government to reform the way in which the UK pension system works.
Commenting on the OECD’s findings, Frances O’Grady, General Secretary of the TUC, said: ‘The OECD has confirmed what we have long suspected – the UK is bottom of the league for pension provision.
‘Working people in Britain face the biggest retirement cliff edge of any developed nation. We are letting down today’s workers if we can’t provide them with a decent retirement income.’
Responding to the findings, a spokesperson for the Department for Work and Pensions said: ‘We have taken decisive action to address our changing population through a new, generous state pension, retaining the triple lock and protecting the poorest through Pension Credit – reducing pensioner poverty close to historically low levels. But there’s always more to do.’
A report published by the Trades Union Congress (TUC) has suggested that future increases in the state pension age could be stopped through the use of ‘economic gains’ generated by robots and artificial intelligence in the workplace.
The TUC examined the impact of the next ‘technological revolution’ on UK workers’ jobs and wages.
It is calling on the government, business and trade unions to work together to maximise opportunities for employees to benefit from the higher productivity generated by robots and artificial intelligence.
Income gains from higher productivity should be used to stop planned increases in the state pension age, the TUC stated.
Commenting on the issue, Frances O’Grady, General Secretary of the TUC, said: ‘With the UK failing to make productivity gains in the last decade, we need to make the most of the economic opportunities that new technologies are offering.
‘Robots and artificial intelligence could let us produce more for less, boosting national prosperity. But we need a debate about who benefits from this wealth, and how workers get a fair share.
‘We should look on the changes ahead as an opportunity to improve the lives of working people and their families. The government could use the revenue generated to reverse policies to raise the state pension age. And businesses could use productivity gains to improve the pay and conditions of workers.’
A report published by the Institute for Fiscal Studies (IFS) has suggested that women aged between 60 and 62 have become ‘worse off’ as a result of the recent rise in the state pension age.
Between 2010 and 2016, the state pension age for women increased from age 60 to 63. The government intends to align the state pension age for women with the state pension age for men, which is currently age 65.
The report found that women between the ages of 60 and 62 have experienced a £32 reduction in their weekly household income since the change.
Poverty rates amongst women in this age group have risen ‘sharply’, the IFS suggested.
Jonathan Cribb, Senior Research Economist at the IFS, said: ‘The tax and benefit system is much more generous to those above the state pension age than those below it.
‘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.’
The government has announced that the rise in the state pension age from 67 to 68 will be phased in between 2037 and 2039, rather than between 2044 and 2046, as was previously planned.
The change could potentially save £74 billion by 2045/46, the government said.
Individuals born between 6 April 1970 and 5 April 1978 will be affected. The government stated that no one born on or before 5 April 1970 will see a change to their proposed state pension age.
David Gauke, Secretary of State for Work and Pensions, commented: ‘Since 1948, the state pension has been an important part of society, providing financial security to all in later life.
‘As life expectancy continues to rise and the number of people in receipt of state pension increases, we need to ensure that we have a fair and sustainable system that is reflective of modern life and protected for future generations.’
However, the Trades Union Congress (TUC) has warned that the state pension age is now higher than many individuals’ life expectancy.
Frances O’Grady, General Secretary of the TUC, stated: ‘A decent retirement is a right for us all, not a privilege for the few.
‘Rather than hiking the pension age, the government must do more for older workers who want to keep working and paying taxes. Workplaces and working patterns need to adapt to their needs.’
An analysis carried out by the Government Actuary’s Department (GAD) has revealed that workers aged 30 and under may not receive a state pension until the age of 70.
The GAD has suggested that the state pension age could rise to 70 as soon as 2054.
Under existing legislation, the state pension age for those born after 1978 is set to rise to 68. Currently, the earliest age at which a woman can begin receiving a state pension is 63, whilst a man can start to receive a state pension at the age of 65.
By the end of 2018, the state pension age will have risen to 65 for both men and women.
The government is expected to address the rise in the cost of pensions, which is caused by longer life expectancy and therefore an increasing ratio of pensioners to workers.
Commenting on the issue, Steve Webb, the former Pensions Minister, said: ‘It is one thing asking people to work longer to make pensions affordable, but it is another to hike up pension ages.’
The Government has stated that it will send letters to more than 100,000 individuals who may potentially miss out on the new State Pension due to their lack of national insurance contributions (NICs).
A rule change came into effect during April requiring savers to have accrued a minimum of ten years of NICs in order for them to be eligible for the Government’s new State Pension.
A Work and Pensions Select Committee report has claimed that many individuals would have been oblivious to this rule change, and may, in fact, not be entitled to receive a weekly pension payment.
Only those who have made NICs for 35 years will be entitled to the full weekly amount of £155.65. Savers with NICs of between ten and 35 years will be eligible to receive a proportion of this amount.
However, individuals who have made fewer than ten years of NICs will not be entitled to receive any amount.
The Department for Work and Pensions (DWP) has stated that it intends to write to individuals most at risk before the end of 2016.
From 6 April 2016, eligible retirees have been able to claim the new State Pension if:
- they are a man born on or after 6 April 1951
- they are a woman born on or after 6 April 1953.
From 2020, the State Pension age (SPA) will be equalised for men and women, and will be set at 66.
Savers who reached SPA before the introduction of the new State Pension had been able to increase their additional State Pension through the payment of Class 3A voluntary NICs.
Women who will be adversely affected by a hike in the State Pension age may not be offered any relief, the Secretary for Work and Pensions, Stephen Crabb, has suggested.
Many of those affected had hoped that they would be granted early access to their State Pension.
However, Mr Crabb told MPs that a compromise to the issue would not be possible.
He stated: ‘I don’t see there is a do-able policy solution. It is just fiscally impossible.’
Many women born between April 1951 and 1960 have argued that they were unaware their State Pension age was due to be raised by up to six years.
Some have reported that they do not have sufficient funds to live on, and do not have enough time to make alternative financial arrangements.
Previously, Pensions Minister Ros Altmann had reported that she was looking into ways of dealing with the issue.
Members of the Women Against State Pension Inequality (WASPI) campaign group have said that they were disappointed with the latest decision, but remained hopeful that a solution could be reached.
From 2020, the State Pension age will be equalised for men and women, and will be set at 66. Previously, women could retire at the age of 60, whilst men could retire at 65.