PENSIONSANDSAVINGS.COM

4 December 2017

• Rise in pensioner poverty deeply concerning
• Poorest pensioners falling behind because triple lock doesn’t protect Pension Credit
• More older women in poverty as they have lower state and private pensions than men

Recent reductions in pensioner poverty are going into reverse: Figures released today by the Joseph Rowntree Trust point to a worrying rise in poverty among both children and pensioners. Pensioner poverty has reduced significantly in recent years, but this trend seems to have gone into reverse. Poverty is a particularly pernicious problem for pensioners, since once they are in poverty, they have little prospect of future improvements. Working age poverty is often temporary, as people move back into work and improve their incomes. But the oldest pensioners do not have that option.

Triple lock is not enough to address pensioner poverty: Policymakers have often suggested that the much-vaunted ‘triple lock’ on state pensions, which promises an increase each year in line with earnings, prices or 2.5%, whichever is highest, ensures proper protection for pensioners. This is simply not the case. In fact, the ‘triple lock’ only protects the Basic State Pension (around £122 a week) and the full new State Pension (around £160 a week, but only available to the youngest pensioners). It does not apply to Pension Credit, so it does not protect the poorest pensioners at all.

Pension Credit only increases in line with average earnings, it is not triple locked: Pension Credit is crucial for the oldest and poorest pensioners, but this means-tested benefit is only linked to the rise in average earnings. As earnings have lagged behind the rise in inflation, the poorest pensioners have become relatively poorer.

Pensioner poverty rising again as oldest and poorest pensioners are left out of the triple lock: Before the new State Pension system was introduced, the triple lock was a helpful means of alleviating pensioner poverty, by boosting the Basic State Pension. And even though the Pension Credit is officially only tied to the rise in average earnings, the Government increased Pension Credit by more than this. However, as average earnings have fallen behind rising prices, Pension Credit is now falling behind. In fact, the State Earnings Related Pension and State Second Pension increase in line with prices, so those elements of the state pension are also protected, however the poorest pensioners are only protected by average earnings.

Oldest and poorest pensioners are more likely to be women and those who don’t own their home: The most particular problem of pensioner poverty tends to be for older single women, many of whom lost out in both state and private pensions when they were young and are now losing out on the triple lock in their old age. In addition, the sharp rise in housing costs, such as rents, may be causing problems for those pensioners who do not own their own home.

Government should ensure that the Pension Credit does not fall behind the rest of the economy: The rise in pensioner poverty is a real cause for concern and it is important that the Government does not lull itself into a false sense of security that the triple lock is all that pensioners need. Providing the best protection to the youngest pensioners, while leaving the oldest and poorest unprotected by the triple lock, is surely the wrong way round. A re-evaluation is urgently required as surely civilised countries must protect the poorest and most vulnerable properly.