PENSIONERS MOST AT RISK OF POVERTY
23. The evidence received by the Committee focused
our attention on a number of groups who seem to be most at risk
of poverty, now, in the future or both. These groups included:
older pensioners; pensioners with disabilities and their carers;
women; people from black and minority ethnic groups; self-employed
people; and pensioners in institutional care. Although we will
look at each in turn, it should be noted that the categories overlap
to some extent. For example, women significantly outnumber men
in the age group 75 and over; and, in 1999, only 27% of working
age Pakistani and Bangladeshi women participated in the labour
24. That the recently retired tend to be better off
than older pensioners was strongly backed up by evidence presented
to us by the National Pensioners Convention. It stated that average
gross incomes for recently retired single pensioners, and for
those over 75 were as follows:
(figures in £s)
| ||Recently Retired||75 or over
25. The National Pensioners Convention went on to
explain that "more than half the difference in total income
between the two groups is accounted for by the earnings of the
recently retired, which in most cases are unlikely to continue
for more than a few years. The newly retired also have twice as
much investment income, but this too is likely to diminish over
the years of retirement as savings are used up. The difference
in the value of occupational pensions might appear to represent
a more permanent advantage for the younger group, but occupational
pensions, like state pensions, once in payment, are at best price-indexed
and do not rise in line with average earnings. What now seems
a generous occupational pension, therefore, will seem much less
generous compared with average earnings 10 or 15 years hence,
on which the pensions of those then reaching retirement will be
based. In short, while younger pensioners have higher incomes
than older pensioners, the figures do not suggest that, when they
in turn become older pensioners, they will be better off than
26. The point about occupational pensions and the
age of pensioners receiving them was reinforced in evidence presented
to us jointly by the National Federation of Post Office &
BT Pensioners, the National Association of British Steel Pensioners
and the Civil Service Pensioners' Alliance. It stated that "The
older a pensioner is, the more likely they are to have a small
occupational pension.... for the BT pension scheme (and we have
no reason to suspect it will be different for other pension schemes),
nearly 50% of pensioners over 85 receive a pension of less than
£76 per week. Nearly 30% of 60-64 year olds receive more
than £183 per week compared to only 13% of 85-90 year olds....
Because the pension of the older person has risen only in line
with the RPI and not the average earnings index, they have fallen
behind year on year. It is also the case that when pensioners
initially retire they often feel that they are reasonably well
off with their occupational pension. However, as time goes on,
they find it harder and harder to cope because of the increasing
gap between themselves and people still in work."
27. Age Concern also stated that "older pensioners
are more likely to face poverty. They may not have had the same
opportunities to pay into second pensions as current workers.
Furthermore, income that was adequate on retirement may not be
20 years on, due to: income not keeping pace with general living
standards or falling in real terms; savings being used up; and
costs increasing due to disability.
Ms Holly Sutherland, Director of the Microsimulation Unit at the
Department of Economics, University of Cambridge, agreed that
older pensioners might have extra needs because of mobility difficulties
and care needs which might not be met from public funds. She also
noted that they are likely to face further needs which are more
difficult for them to meet than is the case for the newly retired:
"their non-financial assets will have depreciated and therefore
their needs are higher because, even if when they retired they
had a nice house and all the things that people need (and we consider
that people need things like washing machines, televisions and
videos and so on), twenty years into retirement many of those
things will have broken down or need replacing, and the very crucial
things like the house needing repair.... and unless the pensioners
have adequate income they will not be able to do that and their
general wellbeing will lower...."
28. Generally, older pensioners face greater challenges
than those who are recently retired. They are, currently, less
likely to have an occupational pension; where they do, this will
have diminished, in relative terms, because it will have been
linked, at best, to prices and not to incomes. While the coverage
of occupational pensions is likely to increase, the price-related
nature of them will not, meaning that this will remain as both
a long- and short-term issue. Also, older pensioners' incomes
from earnings and investments are lower. As well as having a lower
income, older pensioners can face greater expenses, related to
disability, mobility needs and depreciation of assets. Therefore,
we believe the need to provide enhanced assistance to older pensioners
will need to remain a long-term objective for any government.
We return to this point at paragraph 143 below.
Pensioners with disabilities and their carers
29. We have already noted that older pensioners can
face poverty as a result of expenditure incurred because of disability.
However, this problem is not confined to older pensioners, but
can be faced by pensioners with disabilities, regardless of their
age. We were told that "disabled people face considerable
extra disability-related costs for items such as heating, electricity
and transport" and that home care charges are "a major
additional cost for disabled pensioners...Charges in one third
of local authorities can leave disabled people with less than
Income Support to live on. Some councils take up to 90% of a disabled
pensioner's Attendance Allowance in charges."
As well as these points, Disability Alliance also told us that
Attendance Allowance take-up rates are low at 40%-60% of those
a point which was supported by the RNIB.
Disability Alliance also stated that "older disabled people
are discriminated against within the benefits system because Disability
Living Allowance (DLA) is not available to those becoming disabled
over the age of 65. As a result most older disabled people get
no financial help with mobility-related extra costs."
30. Evidence presented to us by the Carers National
Association and the Alzheimer's Society noted that carers were
likely to be the poorest pensioners and that some were experiencing
"acute financial difficulties."
It recommended a series of measures to help older carers, including:
- allowing carers over the age of 65 to make a first
claim for ICA;
- doubling the level of carer premium;
- introducing a carers' strand in the Pensioner Credit;
- ensuring that carers can benefit from the stakeholder
- abolishing or reducing VAT on privately purchased
- re-examining the extent to which disability benefits
meet the costs of disability.
31. We have not had the opportunity to assess the
validity of these arguments in this brief inquiry. However, we
note the points raised by organisations representing older people
with disabilities and their carers and believe that this area
merits further attention. The specific issue of poverty amongst
pensioners with disabilities and their carers is one which we
hope to be able to look at in more detail in the future.
32. The Fawcett Society told us that "Women
make up the majority of pensioners in the UK today. They also
make up the majority of the poorest pensioners with twice as many
women as men being dependent on income support and older women
living alone being the poorest sector of pensioners."
Women pensioners are at particular risk of poverty, principally
for two reasons: their longer age expectation means that they
are more likely than men to face the problems encountered by older
pensioners described above; they are likely to have had a more
intermittent work history than men, and their work was likely
to have been lower paid and this will be reflected in their pension
rights. Age Concern told us that "in general women have lower
incomes than men.... Older women living alone are particularly
likely to be living in poverty."
33. The evidence submitted to us jointly by the National
Federation of Post Office & BT Pensioners, the National Association
of British Steel Pensioners and the Civil Service Pensioners'
Alliance stated that "women tend to be much worse off than
men.... many women have broken service because of family commitments
and it is well known that they usually command smaller salaries
than men. There are over three times as many women as men with
pensions of less than £38 per week. In contrast, there are
nearly eight times as many men than women receiving between £153
and £192 per week. Women will also receive much smaller state
pensions than men, again due, amongst other things, to their broken
The Government Actuary's Department noted that basic state pension
income will be lower for those women whose entitlement is based
on their husband's NI contributions.
34. The National Pensioners Convention told us that
"the main difference between male and female pensioners'
average incomes is the amount of occupational pension they receive.
The average gross income of single male pensioners was £168
a week in 1997/98, including £44 occupational pension; for
single women it was £144, including £29 occupational
35. The National Pensioners Convention drew our attention
to a recent publication of theirs which put forward some of the
long term structural and social reasons for women's inferior pension
rights. It stated that "Women are handicapped in building
a good pension income because pension systems were originally
designed for those with continuous full time employment. As it
is still the case that women take the majority of responsibility
for caring for children, as well as caring for sick and elderly
relatives and looking after the household, the average woman spends
many years outside the labour market and additional years working
part time. During these years women are unable to build entitlement
to employment-based pensions. Additionally, women in work still
earn less on average than men. Women full timers earn on average
80% of male full timers' hourly rate and women part timers just
60%. So even whilst in work women are liable to build up less
entitlement to pension income. To obtain sufficient occupational
or personal pension for an income well above Income Support level
it is necessary to have been employed full time for most of your
working life. Amongst women aged over 65 the average time in employment
was just 27 years, with only 19 of those in full time employment."
36. How far this situation will persist is not clear.
A number of factors - home responsibilities protection for the
basic state pension,
equal pay legislation,
the judgement that exclusion of part-time employees from an occupational
pension scheme contravened the Sex Discrimination Act,
the general rise in occupational pension coverage and in women's
participation in paid work - should help to improve women pensioners'
37. However, it is likely to be the case that older
women will still be at risk of poverty. As Mr Tom Ross told us,
"the position of women, certainly in absolute terms, is changing.
More women are in work. The credits which are available under
the basic state pension, for example, will mean that a larger
proportion of women retiring.... in 25 or 30 years' time.... will
be retiring with basic state pensions in their own right which
will be rather greater than those available in the past or currently
by virtue of their husbands' contributions. Against that, of course,
the basic state pension to which they will be entitled under current
policies relative to earnings will have declined even further.....
Equally, more women will be in work and pensions based on work
will help the position of women. On the other hand, we are all
very aware of the incidence of divorce which in itself will lead
to more people, men and women, living in retirement in a single
setting rather than as couples. When you put all these things
together my response would be that the position of women overall
in retirement is likely to improve but relative to all pensioners
the position of older women is still quite likely to be that they
are going to be among the poorest."
38. The Fawcett Society argued that the most effective
way of tackling poverty amongst women pensioners would be to raise
the basic state pension. It stated that "60% of women do
not have any form of occupational or private pension and the basic
state pension makes up the majority, if not the total of their
income after retirement. We would like to see the vital link with
earnings being re-established for the basic state pension."
However, as we discuss at paragraph 56 below, only a small proportion
of women qualify for a full basic state pension in their own right.
Pensioners from ethnic groups
39. As with women and with older pensioners, the
position of pensioners from ethnic groups will to a large extent
be determined by their employment histories, their NI contributions,
and their participation in occupational pensions. Age Concern
told us that "to avoid any kind of poverty, you need additional
pensions and resources. We know that people from ethnic minority
groups, particularly certain ethnic minority groups, are likely
to.... have lower wages, have lower levels of savings, and [that]
these aspects are likely to mean that they will tend to be poor
40. Additionally, it was suggested to us that pensioners
from ethnic groups might face particular problems in claiming
benefits to which they are entitled. Age Concern said that "We
know that ethnic minority older people suffer additional problems.
Sometimes they cannot understand the benefits system as well,
and are really much more scared about going and finding out about
it and getting what they are due to have. And we do have a very
complex system of claiming benefits, which, of course, is very
off-putting to anybody, particularly if you come from an ethnic
minority with a different language."
This issue is discussed in more detail in paragraphs 127 to 130
below, in connection with the Government's take-up campaign for
the Minimum Income Guarantee.
41. The National Pensioners Convention stated that
"ethnic minorities are an extremely important element, because
there must now be very large numbers of people who have come to
this country over the last half century, are now reaching retirement
age, without full contribution records. I do not know what the
solution to that problem is, but it certainly is a problem, and,
of course, those are likely to be, or many of them are likely
to be, the most difficult people to pick up in take-up campaigns
for Income Support."
42. Despite the concerns raised about poverty amongst
pensioners from ethnic groups, there is an absence of hard data
in this area, as noted by Age Concern
and by the National Pensioners Convention.
The Minister appeared to acknowledge this by telling us that "there
is not a single document that I have been able to go to in terms
of income and problems with the pension" but he did think
that there were a "series of activities going on" which
would highlight the concerns raised. The Minister himself outlined
a range of challenges concerning pensioners from ethnic groups,
including: the absence of built-up NI contributions from people
entering the country halfway though their working life; the fact
that many minority ethnic people would have worked in low-paid
occupations (although he could not provide figures on this); and
the issue of language difficulties in relation to pensions and
benefits, which could be a particular problem for women.
43. During our visit to Barnet, the pensioners from
ethnic groups told us of the extent to which they were dependent
on their working family members for financial support. They were
concerned that the financial burden of looking after the older
generation of ethnic pensioners borne by the current working generation
will inhibit that generation's ability to make provision for its
own old age, thus potentially creating an avoidable cycle of poverty
amongst ethnic groups.
44. Despite his concern regarding these issues, and
the lack of clear data, the Minister did not believe that there
was a need to commission research to establish levels of poverty
among ethnic groups. He said, "I do not have any information
that shows me there is a great tranche of people missed out simply
because they are members of minority ethnic communities. We do
a lot in designing our forms, using languages, having interpreters.
I do not have any solid information that shows me that there is
a major problem. I am aware of the issue that they will be low
paid because of the jobs [undertaken] and there will be a higher
propensity of elder minority ethnic members .... on means-tested
45. We received little hard data on the incomes of
pensioners from ethnic groups. We share the concerns of those
who gave evidence that the risk of poverty in old age may be high
among some of these groups, and that at present, monitoring of
the incomes of the current and future generations of pensioners
from ethnic groups is inadequate. We welcome the Minister's
recognition that there are particular problems and challenges
regarding pensions for people from ethnic groups. However, we
are not convinced that adequate information currently exists regarding
the scale or true nature of these problems and we therefore recommend
that the Government commission research to provide more information
concerning the extent of poverty among ethnic pensioners.
46. As we have seen for each of the categories above,
people are at risk of being in poverty as pensioners if they have
an intermittent employment history, with incomplete contributions.
A related problem could be that of the self employed. Approximately
15% of the working population is self-employed.
By definition, this group will not be part of occupational pension
schemes. While they can make provision for private pensions, there
is evidence that many do not do so, indeed, the Minister told
us that half of all self-employed people do not have any second
Mr Tom Ross of the Pension Provision Group told us that "Although
some of the selfemployed make substantial pension provision,
there is evidence that many do not, especially the new-start selfemployed.
So inadequate past provision by and on behalf of these people
is an important factor."
47. The problem of those self-employed people who
do not make private provision for pensions is exacerbated by the
fact that they are not eligible for SERPS or for the state second
pension. Therefore, in the absence of any such private provision
they fall back on only the state basic pension, and therefore
need to rely on means-tested benefits. Mr Tom Ross concluded that
"I think there is a very big challenge facing government
and indeed those who supply funded pensions to get a greater penetration
of pension provision to the selfemployed. Indeed, I think
it is for consideration, given the composition and nature of selfemployment
now, whether a way should not be found to include them in the
state second pension as well."
The Pension Provision Group has produced research into pension
provision for the self-employed which was expected to be published
soon after this report.
48. The Minister noted that a further problem was
that the nature of self-employment was changing, with the self-employed
less frequently being in a position to sell a business upon retirement,
as had previously been the case. He acknowledged that "we
must not miss out the millions of self-employed people, low paid
and moderate earnings. We are designing future pension provisions
for the rest of the operation." He also noted that the self-employed
"are not involved at the present time in the state second
pension. It may be that in the near future the self-employed on
a compulsory basis would have to pay for it, it would not come
The Minister made it clear that the issue of compulsion in relation
to the self-employed and the state second pension had not yet
been looked at in detail, but that a debate would get underway
once the Pension Provision Group published its forthcoming report.
49. We note that there is potentially a serious
problem which could result in many self-employed people being
reliant on means-tested benefits upon retirement, a fact which
is exacerbated by the changing nature of self-employment and the
capital assets owned by the self-employed. We recognise that there
is an argument for compelling the self-employed to make provision
for a second pension, and that there is scope for this to be achieved
via the state second pension. We recommend that this option be
considered once the Pension Provision Group has produced its forthcoming
report into pension provision for the self-employed.
Pensioners in institutional care
50. All the standard statistics that the Committee
has had access to exclude those in institutional care. But several
groups drew to our attention the extremely low levels of income
which pensioners are left to survive on if they have to enter
residential care. The personal expenses allowance which pensioners
are left with after paying residential care fees is set at £15.45
per week. Citizens Advice Bureaux report that "the current
level is totally inadequate to cover the every day expenses of
a client living in a care home and to allow them a minimal level
The National Association of Pension Funds agreed that the level
"is not sufficient for pensioners to meet their basic needs."
Age Concern also called the personal expenses allowance "inadequate."
Among the expenses which have to be covered from the allowance
are clothing, transport, leisure activities, extras such as sweets
and fruit, liabilities for a former home until it is sold such
as standing charges and insurance and even, in some cases, services
such as chiropody, physiotherapy, incontinence pads and escort
services which should more properly be funded as part of a local
authority care plan.
51. We agree that the current level of the personal
expenses allowance for pensioners living in residential care is
inadequate. We recommend that the Government commissions research
to establish the level of personal expenses which is necessary
to enable pensioners in institutional care to live their lives
Pensioners most at risk of poverty: conclusions
52. The evidence we have received leads us to
conclude that it would be complacent to think that disparities
in the incomes of older and younger pensioners and between retired
men and women are set to disappear, although they may narrow.
However, the oldest look set to remain among the poorest, and
particularly the oldest women. In addition, we believe that there
are new challenges to be faced, particularly in ascertaining the
true situation regarding poverty amongst pensioners from ethnic
groups and how this can best be tackled, and regarding the pension
provision of self-employed people.
48 Evidence provided by Age Concern, PP17B, not printed.
Ev., p. 35, para. 2.4. Back
Ev., p. 15, paras 8-10. Back
Ev., p.3, para 4.5. Back
Q. 210. Back
Ev., p. 131. Back
Ev., p. 138,. Back
Ev., p. 131. Back
Ev., p. 126. Back
Ev., p. 162, para 2. Back
Ev., p. 4, para. 4.10. Back
Ev., p. 146, para. 11. Back
Q 137. This option was withdrawn in April 1977, although those
who had already opted to pay reduced contributions retained their
right to continue to do so. Back
Ev., p. 33, para. 2.6. Back
Zelda Curtis, Spotlight on Women's Pensions: How the Pension
System fails Women, (NPC, 2000), quoted in Ev., p. 33, para.
Introduced in1978. Back
Equal Pay Act 1970. Back
Bilka-Kaufhaus GmbH v Weber von Hertz, 1987 ICR 110. Back
Q 116. Back
Ev., p. 162, para. 4. Back
Q 18. Back
Q 15. Back
Q 69. Back
Q 18. Back
Q 60. Back
Q 247. Back
Q 248. Back
Q 118. Back
Q 267. Back
Q 117. Back
Q 118. Back
Q 267. Back
Q 268. Back
Ev., p. 121. Back
Ev., p. 164. Back
Ev., p. 3, para 4.7. Back
Ev. p. 121. Back