A report by the International Longevity Centre UK (ILC) highlights international research which suggests that state pension reforms have significant potential to exacerbate social inequalities.
The report, called “The EXTEND project – Exploring pension reforms, work, and inequalities”, can be found here.
Higher pension age disadvantages the poor?
The research suggests that who will be better able to take advantage of an increased state pension age are more highly skilled, better educated, and are paid more.
This advantaged group will enjoy better health and be able to contribute more into their pension.
However disadvantaged workers could be involuntarily forced to leave the labour market early, due to worse health and having greater caring responsibilities.
The move to a contribution-based pension scheme will cause disadvantage to some. Women with lower education could see their monthly pensions cut by up to 25% under the new system compared to before.
International comparison
The report highlights the EXTEND project, a international project exploring the impact of policies around extending working lives on social inequalities.
The research was conducted across five countries (the UK, Finland, Germany, Denmark and the Netherlands). It was part of the EU Joint Programming Initiative, “More Years, Better Lives – The Potential and Challenges of Demographic Change.”
The report shows that other countries have been able to implement state pension reforms without exacerbating social inequalities to the same extent as the UK.
The ILC argues for a reliable basic pension component to reduce the risk of social inequalities when pension ages are adjusted in line with average longevity increases.
“Linking the pension age to average life expectancy is a route to increasing social inequality.
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.”
“Our 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?”