Commenting on the Work and Pension Select Committee’s inquiry into the early drawing of state pensions, Aegon says that early access to state pensions could temper backlash against future increases in the state pension age.
However Royal London recently raised concerns that this would be of "little or no benefit" to the women most affected by rising state pension ages, whilst adding "considerable complexity" to the system.
It added that the relatively low level of the state pension makes this a challenging option for those without other income to draw on.
Royal London argued that the option of early access at a reduced rate is likely to be most attractive to those who can complement their state pension with other income sources, and least valuable to the most vulnerable who may be largely dependent on their state pension income. However, if the real value of the state pension were to rise through the continuation of the ‘triple lock’ policy, the case for the option of early access might be strengthened.
Steven Cameron, Pensions Director at Aegon, said:
“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 reduced 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.”
