Getting On: Universal Credit and older workers

Published on Tax and Welfare

Britain is missing a crucial opportunity to encourage more older people into work because the government’s new flagship welfare reform delivers only mixed benefits for the age group.

While many older workers will be better off under Universal Credit (UC) – the system replacing tax credits and several other benefits from this year – others will see their financial incentives to work sharply reduced. In the most severe case, someone aged over 60 and earning £7 an hour could see their annual income from work fall by £1,640 – from £9,120 to £7,480.

  • There is an urgent need to increase levels of employment among older people. As a major welfare reform, the introduction of UC presents a big opportunity to encourage work among this group. The system already incorporates some commendable features. These include increased incentives to save into a pension as well as increased flexibility. The latter is particularly helpful for older workers who may want to retire gradually or who may be unable to work full-time due to caring duties or poor health. These are welcome benefits and there remains scope to improve upon them further by increasing awareness about the financial advantage of saving into a formal pension scheme under UC and the risks of alternative methods of saving, ensuring that carers can benefit from enhanced flexibility and designing an in-work conditionality regime with older workers in mind.
  • However, in moving to an age-blind design UC also risks missing an opportunity to boost employment rates among older people by increasing the incentives for this group in work for longer or re-enter the labour market if they are inactive.