Pensioner poverty is on the rise, IFS warns
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Poverty and inequality among pensioners are increasing, an economic thinktank has suggested, as a rapidly rising state pension has helped those on average incomes but made poorer pensioners ineligible for means-tested benefits, and many fail to claim pension credit.
Pensioners had benefitted from faster income growth than working-age people in the first decade of the millenium, which was marked by a fall in the incomes of workers just before and after the 2008 financial crisis, the IFS said as it published research funded by the Joseph Rowntree Foundation on Friday. This trend seems to be slowing down now, but its effects are not distributed equally.
The IFS said that poorer pensioners have fallen behind since 2011 “in part because they have benefitted neither from increases in private pension incomes nor growth in employment incomes that have boosted incomes for middle-income pensioners and working-aged people respectively”.
The slower increases in poorer pensioners' incomes is despite the triple lock guarantee on state pension uplifts, which has led to substantial rises for state pensioners. The higher state pensions have made poorer pensioners increasingly ineligible for means-tested support, the institute said, citing a fall of 15% in average benefits other than the state pension paid to pensioners from 2011 to 2022.
Anna Henry, an IFS research economist, called on the new government to take action, and pointed to the low take-up of pension credit as another factor increasing poverty.
“The new government will need focus on current and future challenges for pensioner incomes, especially those of low-income pensioners, and not assume that everything will always be getting better. Taking action to raise the low rate of take-up of pension credit – the key means-tested benefit for poor pensioners – would be a natural option,” she said.
Political choices can bring down poverty as they did for pensioners in the past, argued Peter Matejic, chief analyst at the Joseph Rowntree Foundation.
“We hope the government will prioritise making choices that reduce poverty for everyone,” Matejic said, urging the government to simplify the application process for benefits and educate people on their entitlements.
“Ministers should note that this report highlights more needs to be done to address the low take-up of pension credit which acts as a brake on its power to reduce pensioner poverty. This is a problem across the benefits system, with many people not claiming support they are entitled to,” he said.
Relative pensioner poverty increased from 2011 to 2022, from 13% to 16%, meaning an additional 300,000 pensioners now live in relative poverty. This rise reverses a previous trend of sharply reducing pensioner poverty; between 2002 and 2011, pensioner poverty fell to 13% from 25%.
Pensioners had benefitted from faster income growth than working-age people in the first decade of the millenium, which was marked by a fall in the incomes of workers just before and after the 2008 financial crisis, the IFS said as it published research funded by the Joseph Rowntree Foundation on Friday. This trend seems to be slowing down now, but its effects are not distributed equally.
The IFS said that poorer pensioners have fallen behind since 2011 “in part because they have benefitted neither from increases in private pension incomes nor growth in employment incomes that have boosted incomes for middle-income pensioners and working-aged people respectively”.
The slower increases in poorer pensioners' incomes is despite the triple lock guarantee on state pension uplifts, which has led to substantial rises for state pensioners. The higher state pensions have made poorer pensioners increasingly ineligible for means-tested support, the institute said, citing a fall of 15% in average benefits other than the state pension paid to pensioners from 2011 to 2022.
Anna Henry, an IFS research economist, called on the new government to take action, and pointed to the low take-up of pension credit as another factor increasing poverty.
“The new government will need focus on current and future challenges for pensioner incomes, especially those of low-income pensioners, and not assume that everything will always be getting better. Taking action to raise the low rate of take-up of pension credit – the key means-tested benefit for poor pensioners – would be a natural option,” she said.
Political choices can bring down poverty as they did for pensioners in the past, argued Peter Matejic, chief analyst at the Joseph Rowntree Foundation.
“We hope the government will prioritise making choices that reduce poverty for everyone,” Matejic said, urging the government to simplify the application process for benefits and educate people on their entitlements.
“Ministers should note that this report highlights more needs to be done to address the low take-up of pension credit which acts as a brake on its power to reduce pensioner poverty. This is a problem across the benefits system, with many people not claiming support they are entitled to,” he said.
Relative pensioner poverty increased from 2011 to 2022, from 13% to 16%, meaning an additional 300,000 pensioners now live in relative poverty. This rise reverses a previous trend of sharply reducing pensioner poverty; between 2002 and 2011, pensioner poverty fell to 13% from 25%.
Rising SPA has pushed up poverty rates among 60-somethings
Poverty is also an issue among those just below state pension age, with a growing number of people finding themselves out of the job market but too young for the state pension as successive governments have controlled the cost of the state pension by increasing state pension age. The age at which a state pension can be claimed has risen to 66 for women and men and is due to go up to 67 between 2026 and 2028. It is expected to rise further to 68 between 2044-46.
People in their early to mid-60s have the highest poverty rate of any adult age group, socialist organisation the Fabian Society said in April, as a result of government increasing state pension age without putting in place other measures. The IFS noted last year that the increase from 65 to 66 led to about a quarter of 65-year-olds ending up in poverty, more than doubling in one year.
Failings by the Department for Work and Pensions in how it communicated a rise in women’s state pension age from 60 to 66 are also blamed for causing poverty among 1950s-born women. Last year, a survey by campaign group Women Against State Pension Inequality of 7,781 women born in the 1950s found 45% were unable to pay household bills, and a quarter struggled to buy essentials.
What should the new government do to tackle poverty before and during retirement?
Photo: Motortion Films/Shutterstock
Photo: Motortion Films/Shutterstock
