Early access to state pensions could temper backlash against future increases in state pension age says Aegon pensions director Steven Cameron.
The provider is calling on the work and pensions committee to consider early state pension access for all citizens from their early 60s at a reduced rate to accommodate those who are unable to work into their late 60s because of the demands of their profession or health considerations.
The work and pensions select committee is carrying out an inquiry into the early drawing of state pensions, as a possible solution to the problem highlighted by the Women Against State Pension Increase (Waspi) campaign. The DWP has already suggested that even though such a move could be cost-neutral in the way it impacts state pension, other Government expenditure could increase as future entitlements to means-tested provision would rise.
Cameron argues that the cost of compensating the Waspi group would be higher than allowing early access at a reduced rate, but goes further to suggest that everyone should be able to access their state pension earlier.
Cameron says: “The plight of women affected by the increase in state pension age has brought the inflexibility of the state pension system into sharp relief. Aegon believes the all individuals should have the choice of taking their state pension from their early 60s at a reduced level. Women born in the 1950s are currently grappling with an increase to state pension age that will see them receive the benefit much later than expected. With state pension age scheduled to keep increasing, we need a permanent solution for those who simply are unable to work into their late 60s because of job demands or health concerns.
“Choosing a lower state pension from an earlier age means some individuals will find their income is below the threshold that usually entitles people to means tested benefits. But allowing this group to claim a top-up would be very costly for the Government and unfair to other citizens. This is a key issue which needs addressed but it’s not new and shouldn’t be seen as an excuse for barring state pension age flexibility.
“Under the pension freedoms, individuals can already take their pension proceeds as a lump sum at age 55 instead of arranging a regular income from a later age. This could also take their income below the means tested threshold. And from next year, individuals with annuities will also be able to cash these in, again allowing them to reduce their income below benefit thresholds.
“This is a growing issue and the Government needs to make it very clear how consciously reduce pension income will affect future benefit claims. Otherwise, we face a growing population who’ll find in retrospect that they’ve opted into pensioner poverty.”