Living on a low income is hard work

Retirement should be a time when we can take things easy and enjoy life – and for some it is. But for too many people with low incomes just getting by takes a great deal of effort.

A new Age UK report, “Living on a Low Income in Later Life”, based on interviews and discussion groups with low income older people, paints a picture of lives that revolve around budgeting to make every penny count and keeping meticulous records of spending. A shopping trip isn’t just a quick dash to the nearest shop. It can be a carefully planned mission – going to one place where the teabags are cheaper, getting the bus to another where items are on special offer and then a carefully timed visit to a store that marks down prices at the end of the day. However this is only possible if you are reasonably fit.

People taking part in our research talked about cutting down, doing without and making do. A couple of people said they just used a hob and microwave rather than facing the cost of a replacing a broken oven. Continue reading “Living on a low income is hard work”

State pension age – last chance for fairer reforms

There’s one last opportunity coming up for MPs to introduce changes to state pension age in a fairer way. The Pensions Bill currently before Parliament brings forward increases to state pension age. It would equalise men’s and women’s state pension age at 65 in November 2018, and then raise it to 66 by April 2020 – six years early than planned. This would result in nearly 5 million people having to wait longer than expected to draw their state pension. Among these are 330,000 women who will have to wait 18 to 24 months longer. At Age UK we believe these changes are happening too quickly without giving people time to rework their retirement plans.

We are currently awaiting a date for Report Stage and Third Reading in the House of Commons – the final opportunity for MPs to make changes. This could be in the week starting the 12 September.

We are encouraged that Secretary of State for Work and Pensions Duncan Smith, has said he wants to implement changes fairly and get the transition right. We are urging the Government to reconsider the position and at the very least introduce measures to protect those who would be most affected. For more information and details about how to get involved see http://www.ageuk.org.uk/get-involved/campaign/state-pension-age-campaign/

Little progress on pensioner poverty

The annual poverty figures came out earlier this month covering the last year of the Labour government – 2009-10.  For those who love figures, Households Below Average Income is a must-read – over 250 pages with some 150 detailed tables.

Within this mass of numbers are the key headline poverty rates. For older people there is no change in the most commonly used measure. This defines poverty as income of less than 60% of median (typical) household income after housing costs. On this basis shockingly there are still 1.8 million (16%) of pensioners living in poverty. Levels are even higher when measured before housing costs although at least these showed a fall from 2.3 million to 2.1 million since the previous year.

The poverty figures are however considerably lower than when Labour came into power in 1997. At that time 2.9 million pensioners were in poverty (after housings costs). There was rapid progress in the early years of the 21st century with poverty rates falling by over 1 million by 2005-06. This was at least partly due to the introduction of pension credit and other more generous benefits for older people. And while a minimum level of income is essential it is not the only factor that contributes to standard of living.

This year the report includes a useful new measure of material deprivation for pensioners. Material deprivation is measured by asking people if they have particular items, or can do certain things, that most people consider essential. For example this includes having a damp-free home or being able to replace a cooker if it broke down. If people answer no then the reasons why are explored. Under this measure 9% of people aged 65+ are in material deprivation. Interestingly there is little overlap between income poverty and material deprivation among pensioners, suggesting these are somewhat different but complementary measures of disadvantage and exclusion.

So the Government has the tools to measure progress. It also made a good start when it came to power by announcing the restoration of the link between increases to the state basic pension and average earnings through the triple guarantee. But this will take time to have an impact and for some, gains will be outweighed by other changes such as a lower level of winter fuel payments and a change to the index used to uprate the state additional pension and some other benefits. The Coalition Government has a radical reform agenda including proposals for state pension reform for future pensioners. We are still waiting for a plan to show how poverty among current older people is going to be reduced and abolished.

Spending Review – state pensions and welfare

The welfare budget has again been targeted for savings. In the Emergency Budget in June £11 billion of savings were announced and, in the recent Spending Review, George Osborne set out a further £7 billion of savings to be made by 2014-15. In the context of such major cuts it will be somewhat of a relief to many older people that cold weather payments will remain at £25 for each week of very cold winter weather and that despite rumours that the universal winter fuel payments could be restricted or means-tested they will not be changed.

Other much valued universal support such as bus passes and free prescriptions are also unscathed.  People aged 65 and over receiving the savings credit as part of their Pension Credit will be worse off as the maximum payment will be frozen for 4 years, although many of the other welfare savings will have limited impact on people under state pension age.

For those of working age, in the longer term the Work and Pensions Secretary Iain Duncan Smith has been given the green light to take forward his plans for major reforms to combine a range of benefits and tax credits into a single Universal Credit.

There is considerable support behind the principle of a simpler system with better incentives to save, but these are radical changes which  bring about major challenges. In the meantime, the contributory element of employment and support allowance will be restricted to one year from 2012-13 onwards. This will save £2 billion by 2014-15, but will mean that people unable to work due to disability and ill-health, who are not entitled to means-tested benefits, will get far less return from what may have been 30 or 40 years of working and paying  national insurance.

And the news isn’t good for some 5 million people in their 50s expecting to draw their state pension at 65 or earlier. Under current rules state pension age would have gradually increased to 65 for women by 2020 and then to 66 for both men and women between 2024 and 2026. The Coalition Government had already signalled their intention to speed up this increase and the Chancellor announced that equalisation will now take place in November 2018 and state pension age will rise to 66 for both men and women by April 2020.

This will be a particular blow to some women who face much steeper rises than expected and breaks the Coalition Agreement which says that any rise to 66 will no t start sooner than 2020 for women.   At Age UK we acknowledge that on average people are living longer but are concerned that disadvantaged groups who are most reliant on state pensions and have lower life expectancies  will be hit hardest. Proposals for further increase in state pension age in the future are also expected. We will be working hard to ensure that further reforms only go ahead if health inequalities are reducing, people have the ability and opportunity  to work longer,  disadvantaged groups are protected and everyone is entitled to a decent state pension.