Govt urged to tackle ‘social inequalities’ caused by state pension reforms

The government is being urged to draw on examples from other countries when it comes to implementing state pension reforms without causing further social inequalities, as it was found the current UK reforms have the potential to "exacerabate inequalities".

In a new report from the International Longevity Centre (ILC), the think tank draws on research by Extend project that found that the state pension reforms have significant potential to exacerbate social inequalities.

The research by Extend found that those best equipped to take advantage of an increased pension age are more highly educated, highly skilled and better paid. Whereas, for disadvantaged workers, the research found that the current UK agenda to increase working lives could lead to involuntary early labour market exit, due to greater health and care needs, as well as caring responsibilities.

It has also ben highlighted by the ILC that the reforms could create new gender inequalities, as the majority of domestic work and unpaid care work is undertaken by women.

Research from the Extend project revealed that with the increase of state pension age and the move to contribution-based pension schemes, women with lower education levels in the UK may lose up to 25 per cent of their monthly pension entitlements under the new system compared to before.

Comparing pension reforms across five countries, the report found that other countries have implemented reforms to state pension without exacerbating social inequalities to the same extent as the UK. Analysis found that in systems with a strong, reliable basic pension that does not depend on contributions, the increase in social inequalities associated with increasing state pension ages is less marked, thus providing greater social sustainability.

Sheffield University professor Alan Walker said that the research shows that increasing pension age in line with life expectancy is a very blunt instrument that exacerbates inequality and particularly harms older women. “If other EU countries can manage the demographic transition without these negative effects why can't we?”

As a result, the ILC is calling on the government to draw on examples from other countries to reduce the risk of social inequalities when pension ages are adjusted in line with longevity increases. It is also urging the government to provide greater support of workers’ health and wellbeing through job and retirement flexibility, as well as support in the management of illnesses and caring responsibilities.

Commenting, ILC senior research fellow, Dr Brian Beach, said: “There is a need for wider approaches to encourage work in later life beyond reforms to pensions, including measures to address health and wellbeing at work, to tackle age discrimination in the workplace, and to support those juggling work and caring.”

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