Poverty trends in the UK
Pensioner poverty in the UK is rising again, and that’s wrong. Failing support systems and underlying trends in housing and pension saving mean this rise is likely to continue. We’re living in a compassionate and just society and we must take action to prevent us falling into poverty as we grow older.
In our society, we believe that everyone should have a dignified life. In recent decades, we have seen pensioner poverty decrease across the UK, mainly due to increasing private pension incomes, rising home-ownership (which reduces housing costs later in life) and income top-ups for those on lower incomes (Pension Credit). Currently, one in six pensioners lives in poverty, a lower rate than for children and working-age adults. That’s a big improvement from two decades ago, when three in ten pensioners were in poverty.
This reduction in pensioner poverty happened because as a society we took action rooted in our sense of decency and compassion.
The rental trap
However, in the last 10 years, the poverty rate for pensioners has begun to increase. The recent rise in pensioner poverty, after housing costs, has been primarily driven by rises in poverty among pensioners who rent.
Around a third of a million more pensioners are in poverty compared with 2012/13, and over half that increase is in the rental sector, despite only one in five pensioners being renters.
Our research shows that pensioners are held back by rising housing costs, and since 2010/11 have had to cope with several changes to the rules around eligible rents for Housing Benefit.
The support previously provided by Housing Benefit has been undermined, and eligible rents have been falling behind actual rents paid by low-income pensioners. Within this group, from 1999/2000 to 2001/02, the proportion of pensioners who must dig into their income to help pay the rent has risen from 29% to 63% among private renters. That’s another burning injustice to add to the list. Yet, this is just one part of the puzzle.
A perfect storm
Over the last two decades, there have been increases in the proportion of people retiring with a private pension and in the amount of income that successive cohorts of pensioners receive from occupational pensions. However, recently, there has been a reduction in income from savings and pensions. For pensioners, whose heads are barely above water, rising housing costs and a reduction in private pension income are waves hitting them one after another. And some groups are hit harder than others. The proportion of women aged 65 to 69 receiving a private pension income has risen by nearly half, from 38% to 56%. The proportion of men aged 65 to 69 receiving a private pension has not changed much in 20 years. However, the proportion of both men and women in the poorest fifth of the population receiving some private pension income has risen only modestly over the last two decades.
Shockingly, the amount of income received from private pensions for the poorest fifth is far below those of the population in general.
This is not the kind of society we want to be, where pensioners must find further money from their pension to cope with rising housing costs.
For the poorest fifth of the population, to avoid falling further into poverty, they must contend with a lower private pension and changes to Housing Benefit eligibility.
Looking to the future
This is not the kind of society we want, and it seems highly likely that the problem will grow as current workers start retiring. As more of us are living longer, targeted action will need to be taken to reduce pensioner poverty.
Among the poorest fifth of the working-age population, only one in six are contributing to a private pension scheme, compared with nearly six in ten of those of the richest fifth.
This must be put right. In a country like ours, everyone should be able to retire without worrying about becoming trapped in poverty.
With support systems failing, negative trends in home ownership, and poor coverage of pension saving, there is a real risk that pensioner poverty continues to rise in the future. The policies that have delivered lower pensioner poverty should not be undone in the longer term and should be balanced against the needs of younger generations. We need a combined approach which increases the cash in the pockets of older people at most risk of poverty, improves the prospects of future generations by bolstering the assets of those of us who are of working age, and prevents us from falling into poverty as we grow older. We care enough to seek justice, and it’s our moral obligation to look out for each other. We mustn’t stand by and let this happen.
UK Poverty Report 2017: https://www.jrf.org.uk/report/uk-poverty-2017
Upcoming IFS report on Living Standards: https://www.ifs.org.uk/publications/14193
Dr Andrea Barry is a Senior Analyst at Joseph Rowntree Foundation.
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The views and opinions expressed in this article are those of the author and do not necessarily reflect the policy or position of Independent Age