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More pensioners have fallen into poverty and an increased number struggle to afford essentials and heat their homes, a new report reveals.
The average income of the poorest pensioners has risen 5 per cent since 2011, compared with a 12 per cent hike for all those aged 66 and over, and 13 per cent for the working population.
This is because despite receiving hikes in the state pension under the triple lock, they have not benefited from increases in private pensions or employment income like better off pensioners, and more have become ineligible for means-tested state support like pension credit.
Struggling with bills: The average income of the poorest older people has risen 5 per cent since 2011, a much smaller rise than pensioners overall or workers
‘Pensions and pensioner incomes got little attention during the election campaign,’ says Anna Henry, a research economist at the Institute for Fiscal Studies, the influential think-tank that compiled the report.
‘In part that is because of a sense that pensioners have been doing better than others, and indeed the gap between the average incomes of pensioners and of working-age people narrowed dramatically especially in the lead-up to, and during, the Great Recession.
‘But reductions in pensioner poverty seen before 2011 have gradually gone into reverse. 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.’
The IFS report, which was funded by the Joseph Rowntree Foundation, also found:
– Relative pensioner poverty rose between 2011 and 2022 from 13 per cent to 16 per cent, which works out at an additional 300,000 pensioners in poverty;
– Average benefits other than the state pension paid to pensioners fell by 15 per cent from 2011 to 2022, mostly because rising state and private pension incomes reduced entitlements, not due to cuts to the generosity of the benefits system;
– During the cost-of-living crisis, the relative poverty rate for pensioners fell from 18 per cent in 2019 to 16 per cent in 2022;
– However, the proportion of pensioners who reported being unable to afford key material items rose from 6 per cent to 8 per cent in this period, and those who could not afford to heat their homes rose from 2 per cent to 5 per cent.
The report on pensioner poverty is part of a wider IFS study on living standards, poverty and inequality, which will be published during the coming week.
The IFS says in the decade to 2012, pensioner poverty was reduced by focusing on living standards, introducing pension credit and increasing the state pension, and meanwhile more people are retiring with some income from a private pension.
But it calls for more to be done to address the low take-up of pension credit, which acts as a brake on its power to reduce pensioner poverty.
The IFS says people not claiming the support they are entitled to is a problem across the benefits system, and more should be done to educate and inform people about what they can receive, and to simplify the application process.
A Department for Work and Pensions spokesperson says: ‘Ensuring a better deal for the pensioners of today and tomorrow is a priority for this Government.
‘We have committed to the triple lock and are promoting pension credit and its benefits such as help with heating costs to protect pensioners on the lowest incomes.’
Caroline Abrahams, charity director at Age UK, says: ‘It’s now beyond dispute that the cost of living crisis hit many older people on low and modest incomes very hard indeed.
‘Many continue to struggle today because their outgoings remain much higher than before energy prices spiked and inflation really took off a couple of years ago.
‘At Age UK we have seen and heard it from older people directly and this new report confirms that it’s true.’
Abrahams urges the new Labour Government to make a serious effort to increase the ‘disappointing’ take-up among pensioners of pension credit, saying much more could be done to spread awareness and make it more accessible.
‘Looking ahead, our aspiration should be to change how pension credit operates so older people qualify for it automatically, without having to go through a tortuous application process,’ she says.
But Abrahams adds that this will not be enough on its own because there are growing numbers of pensioners whose incomes take them just above the eligibility line for pension credit, but who still don’t have enough to be financially secure.
‘This “only just managing” group need help too, such as through targeted measures like a social tariff for energy.’
Morgan Vine, head of policy at the charity Independent Age, says the research showing the significantly widened gap between the poorest pensioners and those on an average income is alarming.
‘Living in financial hardship at any age can be an extremely isolating and miserable experience that chips away at the joys of life,’ he says.
‘Many of the older people we speak to live on very low incomes and have to limit themselves to just one meal a day, wash less to save on water and even avoid socialising as they cannot afford to buy a simple cup of coffee.’
Vine says currently almost two million older people are living in poverty, and pension credit is an effective tool to lift them out of it if take-up is increased from its current low rate of 63 per cent.