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Poorest pensioners dependent on state pension with millions more reliant on it

By: Age UK
Published on 10 January 2018 12:01 AM

For the poorest pensioners, three in every four pounds (78%) of their income comes from the State Pension, rising to approaching nine in every ten pounds (86%) when State benefits are included, according to a new report by the Pensions Policy Institute (PPI), sponsored by Age UK.

The report finds that while levels and sources of income vary across the older population, the State Pension is an important part of retirement income for all pensioners except the lucky few with the highest retirement incomes.

The analysis shows that those in the middle of the income distribution get more than half their income – 53% – from the State Pension, rising to 61% when State Benefits are included. 'Younger pensioners' rely less on their State Pension than 'older pensioners' but as they age these younger pensioners become more dependent on the State Pension too.

For example, those born in the 1930s received 30% of their income from the State Pension at age 65 rising to 44% by age 74. There is a very similar level of State Pension dependency for those born 10 years later (27% at age 65 and 44% at 74). While people's non-State income levels at the point of retirement may appear good, finances often become considerably less rosy over time – earnings from work may stop and other sources of income may lose value in real terms, meaning the State Pension becomes more and more important to them.

By following the same households over time, the research also shows how becoming single in retirement as a result of bereavement or separation can really hit household income. This is more detrimental to women than men as they generally have lower private pension income to fall back on. After bereavement or separation, the reduction in household income due to the loss of private pension is likely to result in greater reliance on the State Pension.

Caroline Abrahams, Charity Director at Age UK, said:

'With more than 1.9 million older people living in poverty it's far from 'job done' when it comes to ensuring everyone has a decent income in retirement.

'Many people are surprised to learn that the average State Pension is only just over £7,000 per year – less than half the annual salary of a full time working adult on the minimum wage of £7.50 an hour. Yet relatively modest though this sum may be, the State Pension is still the main source of income for millions of older people in this country, a situation that is set to continue for the foreseeable future.

'This new report therefore shows just how vital safeguarding the State Pension's value is for providing current and future generations of older people with financial security and peace of mind, helped by the mechanism of the Triple Lock."

Timothy Pike, Head of Modelling at the Pensions Policy Institute (PPI) said:

'The State Pension is a consistent source of income when other sources may lose their value or be completely lost. It becomes increasingly important to all pensioners as they grow older, accounting for nearly half their income by the time they reach the age of 75. The State Pension has also helped to protect women in widowhood against the loss of a husband's private pension income.

'In future the State Pension will underpin a system which places more responsibility upon individuals, providing long-term protection against changing circumstances and inflationary pressures."

The State Pension has recently undergone several major policy changes. In 2016, a new single tier State Pension was introduced, marginally above the level of Pension Credit, and is currently £159.55 per week (full rate 2017/18). In 2011 the triple lock was implemented, which increases both the basic State Pension and new State Pension each year by the higher of the growth in average earnings, the Consumer Prices Index (CPI) or 2.5%. However, the triple lock guarantee is of greater benefit to pensioners who reached State Pension age after April 2016.

Age UK estimates as much as £3.5 billion in money benefits remains unclaimed by older people every year. The Charity would urge any older person who is worried about money to get in touch with Age UK by calling its advice line free of charge on 0800 169 6565 or visiting www.ageuk.org.uk/benefits for free information and advice.

-- Ends --

Notes to editors

[1] Online survey conducted by Opinium on behalf of Age UK between 14th and 18th January 2022. Sample of 1,280 UK residents (65++), weighted to be nationally representative of the 65+ age group.

[1] Online survey conducted by Opinium on behalf of Age UK between 3rd and 8th December 2021. Sample of 2,000 UK adults (18+), weighted to be nationally representative of the 65+ age group.

[1] Online survey conducted by Opinium on behalf of Age UK between 14th and 18th January 2022. Sample of 1,280 UK residents (65++), weighted to be nationally representative of the 65+ age group.

[1] 82 per cent of the 12,508,638 older people in the UK = 10,257,083 people

[1] https://campaigns.ageuk.org.uk/page/96920/petition/1?ea.tracking.id=Website

[1] As reported in the Financial Times, Monday 17th January 2022: https://www.ft.com/content/d246f8b4-80ef-498f-b9f1-7779acc5efd7

[1] On Monday 10th January 2022, the Charity wrote to the Secretaries of State for Business, Energy and Industrial Strategy (Rt Hon Kwasi Kwarteng MP) and for Work and Pensions (Rt Hon Thérèse Coffey MP), calling for immediate action to protect vulnerable older people from the cold this winter. This was the second letter from the Charity in as many months urging Ministers to take decisive action on energy bills to mitigate the potentially devastating impact of the escalating crisis, which will be nothing short of catastrophic for many older people without intervention. In addition, the letter underlined the need for longer-term thinking about how older people with the least ability to pay can be protected from energy price rises in the future. The letter was sent by email.

[1] DWP, 2020. Income-related benefits: estimates of take-up: financial year 2018 to 2019 (Table PC1). Department for Work and Pensions. [Online]. Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/929669/pension-credit-tables-2018-2019.ods. Accessed 19/01/2022 

  • Dependency on the State Pension through retirement PPI Briefing note can be downloaded here (source).
  • The analysis draws on data from The English Longitudinal Study of Ageing (ESLA) which has been following households aged 50+ every 2 years over the period 2002-15
  • For Age UK media enquiries relating to Wales, Scotland and Northern Ireland please contact the appropriate national office: Age Scotland on 0131 668 8055, Age Cymru on 029 2043 1562 and Age NI on 028 9024 5729.

About Age UK
Age UK is a national charity that works with a network of partners, including Age Scotland, Age Cymru, Age NI and local Age UKs across England, to help everyone make the most of later life, whatever their circumstances.

In the UK, the Charity helps more than seven million older people each year by providing advice and support. It also researches and campaigns on the issues that matter most to older people. Its work focuses on ensuring that older people: have enough money; enjoy life and feel well; receive high quality health and care; are comfortable, safe and secure at home; and feel valued and able to participate.

Age UK’s subsidiary charity, Age International, supports older people globally in over 30 developing countries by funding programmes such as vital emergency relief and healthcare and campaigning to raise awareness and change policies.

Age UK is a charitable company limited by guarantee and registered in England (registered charity number 1128267 and registered company number 6825798). Charitable services are provided through Age UK and commercial products are offered by the Charity’s Community Interest Company (CiC) (registered company number 1102972) which donates its net profits to Age UK (the Charity).

About The Pensions Policy Institute (PPI)
The Pensions Policy Institute (PPI) is an educational research charity, which provides non-political, independent comment and analysis on policy on pensions and retirement income provision in the UK. Its aim is to improve the information and understanding about pensions policy and retirement income provision through research and analysis, discussion and publication. Further information on the PPI is available on our website www.pensionspolicyinstitute.org.uk

For more information

Contact the Age UK Media team on 020 3033 1430 (out of hours: 07071 243 243).

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Last updated: Jan 21 2022

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