100 years after first state pension - and 2.5m older people still live in poverty

12/01/2009

One hundred years ago Britain's first 'pensioners' collected their state pension at the post office. It was 5 shillings a week and paid to men and women on reaching 70 years of age. Even though it was means-tested, it was clearly a tremendous advance in social policy and the first time that the state had recognised it had a responsibility to look after those in old age.

But today,  after a century of the state pension, pensioner poverty remains:

• In 2007/8 the number of pensioners living below the official poverty line of £151 a week (60% of median population income before housing costs) rose by 300,000 to 2.5m.
• Between 1997 and 2006, the number of people living in severe poverty – defined as living on less than 40% of median population income – increased by 600,000. The poorest quarter of pensioner households saw their incomes rise by less than 1% last year, well below inflation. The poorest single pensioners saw their real incomes drop by 4%.
• About two thirds of those pensioners living in poverty are women. 

Up to as many as five million do not qualify for a full state pension because they were unable to pay the full national insurance contributions because of caring for their families or being in low paid employment.

• Around 62% of pensioner couples have an annual income of £15,000 or less, and 45% of all single pensioners have an annual income of £10,000 or less.
• In a recent EU survey, only pensioners in Latvia, Spain and Cyprus are more likely to fall into poverty than those in the UK. The Institute for Fiscal Studies concludes that the proportion of pensioners below the poverty threshold will remain at its current level for at least the next decade - despite government reforms.
• A recent survey by Scottish Widows found that 1 in 3 future pensioners will not have sufficient income to avoid poverty when they retire. And up to nine million workers currently have no other pension provision than that which will be provided by the state when they retire. Even those who are currently in a money-purchase (defined contribution) occupational pension scheme have seen the value of their pension funds fall by an estimated £250bn.

Joe Harris, NPC general secretary said: "We owe the original pension pioneers a great debt of gratitude, but they would be turning in their graves if they knew that after 100 years, 1 in 4 pensioners was still living in poverty. In fact, today's state pension is worth even less in relation to average wages than it was in 1908, and next year’s increase in the state pension will be a measly £4.55 a week - at a time when millions of older people will be faced with the unenviable dilemma of trying to heat their homes or eat properly.

“For decades, the policy of successive governments has been to rely on means-tested benefits for existing pensioners and good occupational pension schemes for future generations, as a way of avoiding paying a decent state pension. But this approach is unravelling: means-testing remains unpopular and ineffective at getting money to the poorest, and many decent company pensions are being replaced by insecure money-purchase schemes. Billions of pounds have been wiped off private pension funds in recent weeks – and up to nine million workers now face an insecure retirement."

The Secretary of State for Work and Pensions James Purnell has a different perspective:

"Things have come a long way since 1909. 

People live longer and want more from later life. These days people can spend a quarter of a century getting their State Pension. As the State Pension moves into its second century we are committed to ensuring that pensioners receive the help they need. Which is why, alongside the State Pension and Pension Credit, this winter pensioners will receive additional support through their Winter Fuel Payment and an extra £60 bonus."

But Joe Harris countered: “Pensioners – both now and in the future – need dignity and security in retirement that only a decent state pension can provide. The government should use the huge surplus in the National Insurance Fund to raise the state pension to at least £151 a week to give everyone a pension that takes them out of poverty. After 100 years it’s about time we ended pensioner poverty for good.”