A recent report from the International Longevity Centre UK (ILC) highlights international research from the EXTEND project that confirms that state pension reforms have significant potential to exacerbate social inequalities.
Research from the project shows that those best equipped to take advantage of increased state pension age are more highly educated, more highly skilled, and better paid. Conversely, for disadvantaged workers, the current extending working lives agenda could lead to involuntary early labour market exit, due to greater health and care needs and caring responsibilities.
Moreover, as the majority of domestic work and unpaid care work is undertaken by women, this threatens to create new gender inequalities as women struggle to reconcile longer working lives with caring responsibilities.
Research from the project also reveals 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% of their monthly pension entitlements under the new system compared to before.
Comparing pension reforms across five countries, the report shows that other countries have implemented reforms to state pension without exacerbating social inequalities to the same extent as the UK. The 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.
As such, 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. They also call for greater support of workers’ health and wellbeing through job and retirement flexibility, as well as support in the management of illnesses and caring responsibilities.
Dr Brian Beach, Senior Research Fellow at the ILC says ‘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.’
Professor Alan Walker, Sheffield University says ‘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?’