Unemployed women hit hardest by rise in state pension age, IFS warns

The institute said that future increases should be accompanied by enhanced targeted support to prevent further hardship.

Findings from the 18-page report showed that unemployed women in their 50s suffered much sharper income losses than those still in paid work when the reforms were introduced between 2010 and 2020.

On average, their weekly incomes fell by £81 compared with a £42 drop for women who were working in their late 50s.

The report, funded by the IFS Retirement Saving Consortium, highlighted that these women were more likely to have low incomes, poor health, or disabilities.

“An income top-up is needed for the most vulnerable people to prevent higher poverty rates and widened health inequalities.”

David Finch, Health Foundation

David Finch, assistant director in the healthy lives team at the Health Foundation, said: “This latest IFS analysis highlights the risk of an increasing state pension age. People will live in poverty for longer if their health prevents them from working, especially women. 

“With the state pension age set to increase to 67 from 2026, people will be expected to wait for longer for their state pension. An income top-up is needed for the most vulnerable people to prevent higher poverty rates and widened health inequalities.”

Despite the drop in incomes, the study found no evidence of reduced spending on essentials such as food and energy. 

However, participation in social activities such as sports clubs, museum visits or theatre trips fell by eight percentage points, from a pre-reform baseline of 53%.

Well-being also declined as the average life satisfaction rating fell by 0.25 points on a 0-to-10 scale among all affected women. The impact was greater for those who were already out of work before reaching pension age, with a fall of 0.38 points.

The IFS emphasised that raising the state pension age remains an appropriate response to rising life expectancy, with each one-year increase strengthening the public finances by about £6bn a year.

However, it warned that the government’s third review of the pension age, launched in July, must consider how best to support those who find it hardest to adapt.

Heidi Karjalainen, senior research economist at IFS and an author of the report, said: “Raising the state pension age is an important lever for easing fiscal pressures from an ageing population, but our research shows that the costs of increases so far have not been equally felt. 

“Women already out of paid work by their late 50s, often in poor health and on low incomes, rarely return to paid work in response to a higher state pension age. Instead, they experience larger income losses and reduced participation in social activities.

“These findings do not mean that the state pension age should not continue to rise. Instead, they highlight the importance of enhanced support for those most harmed by increasing the state pension age.

“In general, helping people remain in, or return to, paid work at older ages, while providing additional targeted financial support for those who cannot, can also help maintain public support for future increases. And this could be done by using a small fraction of the boost to the public finances arising from an increase in the state pension age.”

The long-running WASPI campaign has lobbied for a reversal in the state pension age increase due to the disproportionate effect it has had on women born in the 1950s. While the Parliamentary and Health Ombudsman has severely criticised the Department for Work and Pensions’ communication of state pension age increases, the government has declined to issue any compensation for those affected.