We agree with report suggestions to improve support for low-income people nearing state pension age

We agree with a new report that looks at the problems with the current system of means-tested benefits for people both under and over state pension age (SPA). The report suggests changes to better support those nearing retirement age, especially those affected by the increase in SPA.

A key issue in the report - led by the Institute for Fiscal Studies (IFS) - is the difference in support given to people above and below the SPA. Raising the SPA makes sense because people are living longer, which helps with the financial pressures of an aging population.

However, because the support levels differ for those above and below the SPA, the change in state pension age can have a big impact, especially on those who are no longer working before they reach SPA.

The report suggests two ways to support vulnerable people who are getting closer to retirement.

Extra help for people on universal credit

If you're on universal credit and just one year away from the state pension age, the report recommends giving you more support.

For example, raising the universal credit standard allowance by 70% would help people with low incomes and reduce poverty among those nearing retirement.

How much would it cost?

Around £600m a year, which is about 10% of the savings made by raising the SPA by one year.

Who would benefit?

The report estimates that it would benefit around 30,000 households.

Extra support for those on universal credit and health benefits

The second suggestion is to provide additional support for people who are on both universal credit and health-related benefits, one year before reaching the state pension age.

How much would this cost?

Around £200m a year.

Who would benefit?

A smaller group of people, around 3,000 households, because this support is focused on those with health problems.

Our thoughts on the report’s suggestions

Here at Money Wellness, we agree with the IFS that people approaching the state pension age need more help earlier. We see first-hand how there’s a gap in support for people close to retirement.

A third of our customers who are within five years of retirement, have a physical disability or illness that directly affects their income and costs. On average, these individuals live with a monthly budget shortfall of over £100.

Additionally, many people miss out on billions of pounds in benefits every year because the system is too complicated to navigate.

That’s why we believe more proactive support is needed to help people claim all the benefits they’re entitled to.

Are you eligible for universal credit or pension credit?

If you’re unsure if you qualify for universal credit or pension credit, you can use our online benefits calculator to find out. It will also check you’re getting all the benefits you’re entitled to.

 Read more about benefit-related news and advice here.