The IFS highlighted two potential ways to better support struggling pensioners (Image: GETTY)
The looming increase in the state pension age next year, which is projected to net the government around £6 billion annually in savings, could be directly used to help those most affected by the change.
and Financial Fairness Trust part of The Pensions Review, indicated this tough but necessary measure is likely to hit low-income individuals hardest.
The report outlined two potential approaches to provide a financial leg-up for those entering retirement on shaky ground. It also pointed out: “The public finance cost of each of these targeted measures would be a fraction of the savings to the exchequer from increasing the age.”
On one hand, Brits under age could receive additional Universal Credit in their final eligible year. This benefit usually stops when claimants reach age.
The report suggests that hiking the standard allowance on UC by 70% could slash the relative income poverty rate by roughly 5% for this demographic. About 30,000 households with the lowest incomes could stand to gain from this.
:
According to expert calculations, the price tag for this sits at approximately £600 million, or one-tenth of the savings anticipated by the Treasury following the lift in age.
The second approach would target Universal Credit recipients in the same way but only if they also claim health-related benefits. This support would cost even less, around £200million a year, but would drastically reduce the number of people assisted.
Instead of 30,000, only 3,000 households in this age group would be lifted out of poverty.
However, the report warned that both methods could potentially discourage people on Universal Credit from seeking work or encourage people to claim health benefits.
Don’t miss… [WARNING]
Heidi Karjalainen, a Senior Research Economist at IFS and an author of the report, emphasised that the increase in the age is unavoidable to maintain the benefit’s sustainability but added: “Failing to support the most harmed groups risks undermining public confidence in the system and, in particular, the desirability of increases in the age.
“There is a good case for using some of the savings resulting from a higher age for targeted enhancements to working-age benefits for the most adversely affected groups in the run-up to age.”
The report also highlighted that private renters in retirement face the highest poverty rates amongst pensioners, especially risky even when they receive the full new at £221.20 a week.
Mubin Haq, CEO of abrdn Financial Fairness Trust, added: “Levels of poverty amongst private renter pensioners are three times the rate amongst owner-occupiers, with the number living in the private rented sector set to rise significantly. Hardship is also high amongst social renters; however, the situation for private renter pensioners is particularly worrying.”
He continued: “Not only are rents higher, and there is less security of tenure, but state support with housing costs for those on low incomes often fails to meet actual costs or needs and it doesn’t tackle the low availability of one-bedroom properties.”
The addressed report suggests a reform in pensioner housing benefit to allow single and couple pensioners an extra bedroom under their maximum benefit coverage.
The rationale offered is that many retirees who spend most of their days at home may find the additional space “appropriate”, or might need the room for visiting children or grandchildren. Although initially expensive, costing about £150million per year, these costs are anticipated to rise further.
Nonetheless, it could “provide immediate support” and do so at just a fraction of the cost saved by the Government with the age rise. Haq continued, saying: “Increasing housing benefit to allow for a second bedroom would better meet the real cost of private renting and provide much-needed space for carers and family to support older people with their increasing health needs.”