Last week I opened the Inside Government conference on the future of UK pensions, with a presentation on tackling pensioner poverty. With Steve Webb as a fellow panellist I described the human impact for the poorest of our inadequate pension system; ‘scored’ current public policy; and set out Age UK’s policy ‘wish list’.
Pensioner poverty remains a massive issue across the UK. The stereotype of the rich ‘baby boomer’ means that we often think of older people as wealthy homeowners with significant disposable income. For some, this is true, but income inequality within the older cohort is rising steadily.
Over 1.8 million people over 65 live below the poverty line of just £119 per week for a single person. Those most likely to be poor in later life include single women, people from black and minority ethnic communities and the ‘oldest old’ – people currently in their late 70s and upwards. The poverty among many older people is too often exacerbated by benefits being left unclaimed. Somewhere between £3.6bn and £5.4bn in means-tested benefits for pensioners goes unclaimed every year.
Kicking off my score-card, I reviewed the policies in place for today’s poorer pensioners and praised both the current and previous governments for recent initiatives. The key policies are the indexation of Pension Credit to earnings, by Labour, and the Coalition’s early introduction of indexation for the Basic State Pension, with their ‘triple lock’ guarantee.
On the downside, I flagged the possible long term consequences of some of the financial decisions made in the last few months. For example the indexation of the State Second Pension and private pensions to CPI, rather than the generally higher RPI, will mean that overall pension incomes will be significantly lower than would otherwise have been the case in decades to come. For a group of the poorest pensioners, proposed changes to Housing Benefit and future social housing rents could have significant consequences too.
Turning to policy for future pensioners, there has also been real progress. The 2010 reforms to state pension entitlement, introduced by Labour, and the Coalition’s confirmation that we will proceed with auto-enrolment into workplace pensions are both huge steps forward. The silent rise of the grey labour market over the last 15 years perhaps matters just as much. It is really good news that the recession has not dented that progress too much, and we hope that the promised end to forced retirement next year will provide another boost.
Notwithstanding all this positive news, I emphasised that major risks remain with employer pensions; we still have a long way to go to ensure everyone on a low and mid income has access to a secure, value-for-money pension, with reasonable employer contributions.
Finally, I looked at the proposals for further reform emerging from the Government this Autumn. The floating of a single state pension for everyone who qualifies, of around £140 per week, has attracted huge excitement from all parts of the pensions world. It would avoid the need for most of today’s means testing and would provide a solid platform for people of all ages to save.
My caveat is that we also need to remember that a 61-year old woman who retired in 2009 will be with us for decades to come, and should not be left too far behind as improvements are made for future generations of pensioners. We will also need to be wary if the quid pro quo of the single pension is a faster increase to the State Pension Age. While the logic of gradually increasing pension ages to reflect life expectancy is sound, policy makers will need to avoid raising the pension age at a rate that means people from poorer communities can not enjoy more years in retirement with good health.
In Age UK’s view the recent announcement that SPA will rise between 2018 and 2020 was too fast; it will leave a 56 year-old women, who previously would have drawn her pension at around 62 (and possibly expected to receive it at 60) now not receiving payment till around 64. To us, that feels like a significant disruption to retirement planning for someone so close to 60.