Although increasing the state pension age is an appropriate way for government to ease pressure on public finances, changes will not be felt equally by all demographics, the Institute for Fiscal Studies (IFS) has said, suggesting that enhanced targeted support should accompany any increases.

The IFS' latest research showed that this was also the case for previous state pension age increases, with women already out of employment in their late 50s being particularly hard-hit by the rise from 60 to 66 that occurred between 2010 and 2020, experiencing a bigger drop of income as a result.

It pointed out that these women are also more likely to have a low income, to be in poor health or to have a disability.

A key reason that state pension age increases have particularly hit the incomes of women already out of employment in their late 50s was that very few re-entered paid work in response to the reform.

In contrast, the IFS found that, for those who were in paid work in their late 50s, their employment rate at ages 60–64 jumped by 16 percentage points, as significant numbers delayed their retirement.

This means that falls in average income at ages 60–64 as a result of the increase in the state pension age were larger (a fall of £81 per week) for women who were out of employment in their late 50s than for those who were still in paid work in their late 50s (a fall of £42 per week).

Whilst the IFS found no evidence of a fall in average spending on some essential items such as food and energy, it found that the likelihood of participating in social activities fell by 8 percentage points among all women affected by the rises in the state pension age.

Although the group admitted that state pension age increases are still appropriate as life expectancy rises, it highlighted the findings as evidence of the need to find ways to help people stay in paid work at older ages, as well as provide additional targeted financial support for those who find it particularly difficult to adapt to a higher state pension age.

In particular, the IFS said these factors should be a key consideration in the third review of the state pension age, which the government launched in July.

IFS senior research economist and author of the report, Heidi Karjalainen, 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."

---