UK 'facing hidden poverty crisis’ among over 60s as state pension age continues to rise

Pre-retirement poverty is becoming increasingly common as those over 60 are having to wait longer to be eligible for the state pension, a new report from the Fabian Society has warned.

Currently, the state pension age is 66, but the government has legislated for an increase from 66 to 67 in 2026/28 and it’s set to rise further to 68 in 2044/46.

Many people do not intend, or are not able, to keep working for longer which puts them at risk of falling into pre-retirement poverty as they become economically inactive.

The Fabian report found that the UK is "facing a hidden poverty crisis" among 60 to 65-year-olds and aimed to looks at the roots of the problem and presents a strategy for solving it.

In response to the report, Joanna Elson CBE, chief executive of Independent Age warned that there is a real risk of a huge surge in pensioner poverty as the state pension age increases.

In reality, the over 60s living in poverty are skipping meals, living in cold, damp homes and missing out on social interaction as many can’t even afford to meet a friend for a cup of tea.

“It’s a bleak picture, and not one that any of us would wish for as we age,” she said.

The report found there are many reasons for pre-retirement poverty include working reduced hours, having low earnings, having inadequate benefits or not taking up benefits, and not having enough retirement savings, caring responsibilities and ill health.

The research found that there are 800,000 more 60 to 65 year-olds in poverty in 2022 than there were in 2010.

A dip in income before state pension age has pushed many of these people into poverty.

The average income is 16 per cent lower for people aged 60 to 65 than for those five years younger.

Being out of work is one of the main reasons for pre-retirement poverty.

There are more people aged 60 to 64 who are economically inactive (1.7million) than the total number of economically inactive 35 to 49 year olds (1.6million).

If labour market status for those aged 60 to state pension age holds steady, there could be nearly 770,000 more workless people by 2029, the report said.

This would bring the total number of people aged 60 to state pension age who aren’t working to three million, up from 2.2 million.

Phoenix Insights have supported the Fabian Society on their new report and they have reported the four main areas where action is needed:

• “Improving the quality and sustainability of work
• “Providing targeted and effective employment support and careers advice
• “Address the gap between working age and pensioner benefit systems
• “Ensuring lower earners are supported with private pension saving.”

Elson said there are many reasons why someone may not be able to work until they reach the state pension age however the low level of financial support available means people facing significant and long-term barriers to work in later life.

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She urged savers to check what they are entitled to as £1.8billion in means-tested benefits are not reaching the 60 to 65 year olds.

If half of these people received this support, it would lift 92,000 people out of poverty.

Elson said: “The UK Government must increase benefit uptake as a priority.

“More needs to be done to address this so that no one experiences financial insecurity in later life.”