New research finds nearly 2 million pensioners in poverty

New research finds nearly 2 million pensioners in poverty

·                     1.9 million pensioners live in poverty – 16 per cent of all pensioners

·                     A Fabian Society freedom of information request reveals nearly 100,000 pensioners are on a debt repayment      plan with DWP

·                     40 per cent of poor pensioners live in rented accommodation

·                     State pension entitlements are too low to guarantee protection from poverty, while pension credit and housing benefit won’t close the gap – even with full take-up

 New Fabian Society research shows the UK has nearly 2 million pensioners living in poverty. The report comes as the Work and Pensions Select Committee hears evidence on pensioner poverty.

The report, Mature Decisions: Options for alleviating pensioner poverty, shows why this has increased and sets out how the government could tackle it. New analysis shows that under the last Labour government, pensioner poverty fell from 29 per cent in 1997/98 to 14 per cent in 2010/11. This actually increased under Conservative-led governments to 16 per cent in 2022/23.

The state pension is too low to prevent poverty for everyone, the report finds. Poverty is higher among those who retired before April 2016, on the ‘Basic State Pension’, because the old rules made it more difficult to qualify for the full amount. This is particularly true for women. But some receiving the New State Pension also slip through the cracks because of housing costs and National Insurance contribution gaps.

New analysis also shows that pensioner poverty is particularly high for those in rented homes. Of pensioners who rent, 34 per cent are in poverty – compared to the 16 per cent poverty rate for all pensioners. And 40 per cent of all pensioners in poverty are renters. This is because the state pension is set at a level that assumes that rent and certain utilities are already covered, and not everybody gets the full state pension amount.

Pensioner benefits, like Pension Credit and Housing Benefit, are supposed to plug these gaps, but new analysis finds that they aren’t doing so fully. While benefits applications have soared since the Winter Fuel Payment became means-tested, most pensioners in poverty don’t claim these benefits – 77 per cent of pensioners living in poverty receive neither Pension Credit nor Housing Benefit.

But new modelling finds that the problem goes beyond low take-up of benefits. Even if every pensioner claimed the benefits they were entitled to, pensioner poverty would decrease only slightly. This is because many poor pensioners would not qualify for the low level of support on offer – especially if they are in a couple. 700,000 pensioners in poverty have household incomes above the threshold that would qualify them for Pension Credit. And half a million housing benefit recipients do not get enough to cover their rent.

Debt to the Department for Work and Pensions could leave them even worse off. A Fabian Society freedom of information request reveals that nearly 100,000 pensioners have their pension or benefits reduced under a Debt Repayment Plan. This means disability benefits can be reduced by up to a third during the repayment period. Means-tested benefit deductions for pensioners not living in care homes could be between £663 and £1,768 annually depending on the circumstances.

The report sets out how the government can reduce pensioner poverty. It argues that the government should use the future phases of their Pensions Review to consider the purpose of the State Pension and whether it needs to increase to fulfil that purpose in the long term.

More urgently, the government should increase support for pensioners most in need. They should consider:

·                     Raising the state pension for older pensioners who receive the legacy state pension.

·                     Raising means tested benefits for couples

·                     Using technologies to increase take up of benefits 

Fabian Society Senior Researcher Sasjkia Otto, who authored the report, said:

“It’s a common misconception that all pensioners are well off, but this masks significant inequality. Neither the state pension nor benefits guarantee protection from poverty and many are falling through the cracks, especially those who are renting. This situation could deteriorate, as the number of pensioners living in this sector increases.

“Our social contract requires dignity in retirement, and for future generations to have a living standard at least as good as their predecessors. This is now at risk. But there is also a fiscal case to address pensioner poverty, as it costs the UK billions in health and social care each year.

“Social security reforms under the last Labour government helped halve pensioner poverty. Now, it is time for Labour to finish what they started. The 1942 Beveridge report established the principle that the state pension should be set in a way that protects people from poverty. The government should use the upcoming pensions review to consider the purpose of the state pension in the 21st century.”

Notes

2.      The report will be published at 00:01 on 17.01.2025 on the Fabian Society Website.  If you would like an advanced embargoed copy, please email Emma Burnell.