THE BACKGROUND: KEY FACTS AND FIGURES ON PENSIONER
INCOME AND SAVINGS
7. All the figures show that pensioners have become
more affluent in the last twenty years. But although the incomes
of all pensioners have grown, the gap between the richest and
poorest pensioners has also increased dramatically. Between 1979
and 1997, the incomes of pensioner couples in the top fifth of
income distribution rose by 80%. During the same period, the incomes
of pensioner couples in the bottom fifth of the pensioner income
distribution increased by only 34%, much less than for society
as a whole.[8]
In the financial year 1997-98, the richest fifth of single[9]
pensioners had incomes of £206 per week (£189 after
housing costs).[10]
But the poorest fifth of single pensioners had incomes of £68
(£53 after paying housing costs).[11]
8. Table 1 below shows pensioners' position in the
overall net income distribution in 1995-96, compared to 1979.
In 1979, 47% of pensioners were in the bottom fifth in the income
distribution. By 1997, the proportion had dropped to 24%, whilst
the proportion in the remaining four fifths had grown. Fewer pensioners
now need to claim income-related benefits because they are poor.
Whereas in 1979, some 57% of all pensioner households claimed
an income-related benefit, by 1997-98, the proportion receiving
means-tested help had dropped to 37%.[12]
9. In 1997-98 the average income of single pensioners
across the range of income distribution was £132 per week
and for couples £258. The National Pensioners Convention
argued that this average is inflated by a relatively small number
of pensioners on high incomes. They said that a more representative
figure was median net income, which for single pensioners was
£113 a week, and for couples, £203.[13]
This point is confirmed by the DSS in its Pensioners' Incomes
Series 1997-98. It says, "the small number of
pensioner units with very large incomes can have a significant
effect on the mean [average], while the median income is unaffected
by incomes at either extreme."[14]
Table 1 shows that the majority of pensioners, although better
off, have not become well off; they are now most commonly to be
found (32%) in the second fifth of the income distribution rather
than the bottom fifth. In 1997-98, the median income of single
pensioners in this second fifth of income distribution was £94,
of which £68 remained after housing costs.[15]
Mr Andrew Dilnot of the Institute for Fiscal Studies summed up
the position as follows: "pensioners are relatively under-represented
at the very bottom of the income distribution compared to the
rest of the population...Then they are somewhat under-represented
at the top. The bulk of pensioners are found in income terms,
in the bottom half of the income distribution."[16]
10. The most common source of income for pensioners
is the state retirement pension. It provides about a third of
all pensioner income and is the largest single source of support.[17]
It is received by 10.9 million single individuals (98% of all
pensioners) at a cost of £37.7 billion.[18]
From April 2000, it is worth £67.50 per week for a single
pensioner and £107.90 for a couple. Around 86% of men and
49% of women are currently entitled to the full amount, based
on a full contribution record.[19]
11. A source of income available to almost all pensioners
comes from Winter Fuel Payments, introduced in 1997. During the
first two winters of the scheme, eligible households (people over
pensionable age receiving benefits) received £20. Poorest
pensioners (in fact, people aged 60 or more) on Income Support
received £50. In winter 1999-2000, payments were increased
to £100 (£50 each where two eligible pensioners shared
a household). Around 10 million pensioners in over 7.5 million
households received payments. For winter 2000-01, the scheme has
been extended to almost all people aged 60 or more and payments
increased to £150. The need to be in receipt of a qualifying
benefit has been removed. As a result, the numbers eligible are
expected to increase by a further 1.5 million.[20]
12. In 1997-98, 77% of single pensioners and 92%
of couples had other income apart from state benefits. The rise
in pensioner incomes is largely the result of the rise in occupational
pensions. A little under two-thirds of pensioner households (60%)
now receive income from an occupational pension. The average amount
received in 1997-98 was £92 per week. This was an increase
of 86% in the average amount, in real terms, since 1979.[21]
There has also been a rise in investment income, with around 68%
of pensioner households now having some investment income, but
the majority receiving relatively small amounts.[22]
Half of pensioner households who had investment income in 1997-98
received less than £5 a week.[23]
Earnings are also an element of some pensioner incomes, mainly
among younger pensioners. The National Pensioners Convention pointed
out that more than half the difference between incomes of recently
retired pensioners and pensioners aged 75 and over was accounted
for by the earnings of the recently retired.[24]
Among single pensioners, 16% of recently retired single pensioners
had earnings, compared to 8% of all single pensioners under 75,
and just 1% of pensioners over 75.[25]
13. Means-tested benefits (Income Support, Housing
Benefit and Council Tax benefit) are an important part of the
incomes of many poorer pensioners. Pensioners are the largest
single group on means-tested benefits in Britain. Just over a
fifth (21%) of pensioner couples and nearly half (48%) of single
pensioners are in receipt of an income-related benefit. The number
of pensioners with no income other than their state pension and
state benefits stands at around 1.3 million.[26]
Two out of three pensioners who claim Income Support are single
women.[27]
In April 1999, the Government launched its Minimum Income Guarantee
(MIG) giving an above inflation boost to the Income Support rates
for pensioners. In April 2000, the weekly MIG rates for pensioners
were £78.45 for a single pensioner aged 60-74, rising to
£86.05 for those aged 80 or over, and £121.95 for a
couple, rising to £131.05 for couples aged 80 or over.
14. In considering the incomes of pensioners, account
must also be taken of various 'in-kind' benefits and services:
everyone over 60 qualifies for free prescriptions and free sight
tests; pensioners aged 75 and over are entitled to free television
licences; pensioners receive travel concessions; pensioners on
Income Support qualify for free NHS dental treatment, vouchers
for glasses and contact lenses and fares to hospital. Local authorities
also provide a range of care services. A recent study by the Audit
Commission found that around 500,000 people in England and Wales
received home care, of whom 420,000 were aged 65 or over. These
services can be free or subsidised, although the Audit Commission
found that 94% of councils did charge for home care services.
Nearly two-thirds of councils exempted those on the lowest incomes
from charges. Sixty-two per cent of councils take account of users'
savings.[28]
15. Much more information exists about pensioners'
income levels than about their savings levels. Yet when looking
at which pensioners are poor, savings are a factor. Mr Andrew
Dilnot told us, "It is particularly difficult to define pensioner
poverty because, whereas with those of working age it is tempting
simply to look at the flow of their income and spending, amongst
older groups in the population you might think that they would
have built up assets, houses for example, durable goods, so that
the flow of income in particular would be a relatively poor measure
for many of them."[29]
Table 2 below sets out information on the proportion of pensioner
households with savings, taken from the Family Resources Survey.
However, there is some evidence to suggest that capital is under-reported
in the survey, which has relatively low levels of response to
questions on assets.
Table 2
Percentage of pensioner households
38%
11%
10%
11%
29%
| Amount of savings
Up to £1,000
Between £1,000 and £3,000
Between £3,000 and £6,000
Between £6,000 and £12,000
Over £12,000
|
Source: Official Report, 16 May 2000, c 118W
8 The Pensioners Income Series, 1997-98, DSS Analytical
Services Division, 2000. Back
9
'Single' includes widowed and divorced pensioners as well as unmarried
pensioners. Back
10
The figure used here is the median net income of single pensioners
before housing costs. The median income is the income of a person
halfway along the distribution, if all the people in that group
were ranked according to their income. Back
11
The Pensioner Income Series, 1997-98, DSS Analytical Services
Division, 2000. Back
12
Ibid. Back
13
Ev., p. 32, para 2.1. Back
14
The Pensioners' Incomes Series, 1997-98, DSS Analytical Services
Division, 2000, p.20. Back
15
Ibid. Back
16
Q 172. Back
17
A new contract for welfare: Partnership in Pensions,
DSS, Cm 4179, 1998. Back
18
Retirement Pension Statistics, September 1999, DSS Analytical
Services Division, 2000; and Report by the Government Actuary
on the drafts of the Social Security Benefits Up-rating Order
2000 and the Social Security (Contributions) (Re-rating and National
Insurance Funds Payments) Order 2000, Cm 4587. Back
19
A new contract for welfare: Partnership in Pensions,
DSS, Cm 4179, 1998. Back
20
DSS Press Release 00/112, 11 April 2000. Back
21
The Pensioners' Incomes Series, DSS Analytical Services Division,
2000, table 12. Back
22
Ibid., p. 40. Back
23
Ibid., table 11. Back
24
Ev., p. 32, para 2.4. Back
25
The Pensioners' Incomes Series, DSS Analytical Services Division,
2000, table 3. Back
26
Monitoring Poverty and Social Exclusion 1999, Joseph Rowntree
Foundation. Back
27
A new contract for welfare: Partnership in Pensions,
DSS, Cm 4179, 1998. Back
28
Charging with Care, Audit Commission, May 2000. Back
29
Q 172. Back
|