Select Committee on Social Security Seventh Report


The Social Security Committee has agreed to the following Report:—



1. In May this year, the Committee agreed to carry out an inquiry into pensioner poverty, including the adequacy and take-up of existing social security benefits available to people of pension age and, if appropriate, to make recommendations for changes to the social security system.[1] The Committee's decision followed a lengthy inquiry into the merits of the contributory principle, which underlies this country's system of National Insurance benefits. During the course of that inquiry, it became clear that behind the general issue of the role of contributory benefits was a more specific issue concerning pensioner poverty and the role of the basic state retirement pension, which accounts for over 80% of expenditure from the National Insurance Fund. One of the conclusions of our report on the contributory principle was that "there is a clear and urgent problem in meeting the needs and expectations of less well-off pensioners, particularly those just above the Minimum Income Guarantee level, in the light of growing inequality within the range of pensioner incomes generally."[2] Our inquiry identified possible causes and solutions, including the prima facie need to increase the basic state pension, but we concluded at that stage that a more detailed examination was needed into the whole subject of pensioner poverty before informed conclusions could be drawn.

2. During the course of our inquiry we received written evidence from a considerable variety of individuals and organisations including national and local pensioner organisations, local authorities, carers and disability organisations, and Citizens Advice Bureaux. We also took oral evidence from Age Concern, The National Pensioners' Convention, the Chairman of the Pension Provision Group, the Government Actuary, the Institute for Fiscal Studies, the Director of the Microsimulation Unit at the University of Cambridge, and the Minister of State for Social Security with responsibility for pensions policy. The Committee also visited the London Borough of Barnet, where we met the West Hendon African-Caribbean Association, Barnet Asian Old People's Association and Barnet Senior Citizens Forum, the acting Chief Executive, the Director of Social Affairs, and Councillors from the London Borough of Barnet. We are grateful to everyone who has shared their views with the Committee in the course of the inquiry.

3. A special mention must be made of the letters and memoranda we have received from overseas organisations and individuals on behalf of British pensioners living abroad.[3] They raised the important issue of the lack of uprating of the state retirement pension for recipients who are resident abroad. This is an issue to which the Committee is sympathetic. In 1997, our predecessor Committee conducted an extensive inquiry into the subject. The Committee at that time concluded that there was no discernable rationality in the system whereby retirement pensions paid to people living in some countries were uprated but not others; and that a simple change in British law could enable upratings to be paid in any or all overseas countries, provided there was the political will to do so. The Committee recommended a free vote at prime time to allow Members to express their opinion on this important subject. Having studied the particular issue in some detail in their 1997 report, we have decided not to revisit the matter examined by our predecessor Committee in this report.

4. There are around 11 million pensioners in the UK today: 4 million men and 7 million women. Pensioners make up around 18% of the population. 21% of the white population are pensioners, compared to about 6% of minority ethnic groups. The pensioner population is rising, mainly because people are living longer. Even though the pensionable age for women will rise to 65 by 2021, 19% of the population of the UK is expected by then to be over pensionable age.[4] Not only are the numbers of pensioners growing, but as a group they are becoming better off.[5] The average income of pensioners after housing costs rose by 70% in real terms between 1979 and 1997. This is at a faster rate than the rest of society, where during the same period average earnings rose by around 50%.[6]

5. But the overall growth in pensioner incomes conceals serious and growing income inequalities among pensioner households. Britain has been described as having 'two nations' in old age, one characterised by low incomes and means-tested supplementation, the other by relative affluence due largely to incomes from occupational pensions.[7]

6. Our inquiry set out to examine the extent of pensioner poverty in the United Kingdom today, its causes and possible solutions. It took place against the background of the Government's initiatives aimed at tackling poverty and exclusion among older people. These include both long-term structural reform aimed at preventing pensioner poverty in the future, and more immediate relief for today's poor pensioners. The Government's pension reforms and the degree to which they will address the problems identified, were inevitably a central part of the inquiry.

1   Social Security Committee, Press Notice no. 17, Session 1999-2000, 11 May 2000. Back

2   Social Security Committee Fifth Report, Session 1999-2000, The Contributory Principle, HC 56-1, para 120. Back

3   See Appendix 1, Appendix 16, and evidence submitted by the Canadian Alliance of British Pensioners, PP 25, not printed. Back

4   Social Inequalities, Office of National Statistics, 2000. Back

5   IbidBack

6   Ibid., p. 41. Back

7   Professor Robert Walker, 'The Making of a Welfare Class,' forthcoming. Back

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