The Pension Credit and pensioner
incomes
17. At the end of December 2004, there were some
2.65 million pensioner households (3.22 million individuals) in
the UK receiving Pension Credit, with an average weekly award
of £41.67. Of these 2.65 million pensioner households, 1.99
million were getting more money than was the case under the previous
Minimum Income Guarantee.[27]
Many welcomed this increase.[28]
18. The Department for Work and Pensions estimates
that the Pension Credit reform cost £2 billion and that nearly
60% of this additional spending goes to the poorest third of pensioners
and around 80% to the poorest half.[29]
The progressiveness of the reform across households containing
an individual aged 65 or over, under the assumption that all entitled
families claim the Pension Credit and other mean-tested benefits,
is shown in Figure 1. (In practice there are some low income pensioners
who are not taking up their Pension Credit entitlements. Incomplete
take-up is discussed in Chapter 6.) The poorest tenth see an increase
in their net incomes of 8.1%, while the richest tenth see an increase
of only 0.3%. In cash terms, the bottom decile still gains the
most. The large increases in the incomes of lower income pensioner
households who receive the Pension Credit should have a considerable
effect on their living standards, and research by Age Concern
has found that just over half of respondents in their study of
Pension Credit recipients reported that it had made "a noticeable
difference to …[their] quality of life".[30]
19. We welcome the fact that the Pension Credit
has increased the incomes of many pensioners.
The Pension Credit and pensioner
poverty
20. Recent years have seen a large fall in the proportion
of pensioner households in absolute income poverty.[31]
In 1996-97, 27% of pensioner households had income after housing
costs of less than 60% of median income in that year. The latest
figures, which are for 2002-03, show that only 9% of pensioner
households had income below the same threshold. For absolute income
poverty, figures for income before housing costs also show a decline
from 21% in 1996-97 to 12% in 2002-03.[32]
21. The picture for relative income poverty[33]
is less clear. As highlighted in DWP's memorandum,[34]
in terms of income after housing costs there has been a decline
in the proportion of pensioner households with incomes below 60%
of median contemporary incomes from 27% in 1996-97 to 21% in 2002-03.[35]
On this measure of income, for the first time in almost 20 years
a pensioner drawn at random from the population is less likely
to be in poverty than a non-pensioner.[36]
For relative income poverty, in terms of income before housing
costs there is no evidence of a decline, as there were 21% of
pensioner households with income below 60% of median income in
both 1996-97 and 2002-03.
22. Figures for 2003-04 will become available in
the Spring of 2005, and will cover a six month period when the
Pension Credit was in place and the preceding six months when
it was not. The Committee recommends that the Department publishes
separate statistics on pensioner poverty for the first and second
halves of 2003-04 to give a better indication of any early impact
of the Pension Credit on pensioner poverty.
27 HC Deb, 2 February 2005, col 68WS Back
28
See for example, Ev 142, Ev 156 and Ev 167. Back
29
Ev 88 Back
30
Ev 143 Back
31
Defined as less than 60% of the 1996/97 median household income
up-rated in line with inflation. DWP, Opportunity for all:
Sixth Annual Report 2004, Cm 6239, September 2004, para 242 Back
32
DWP, Households Below Average Income 2002-03, March 2004,
Table G8.1 Back
33
Defined as below 60% of median income. Back
34
Ev 92 Back
35
DWP, Households Below Average Income 2002-03, March 2004,
Table G3.1 Back
36
Brewer et al, Poverty and Inequality in Britain: 2004: Commentary
96, (Institute for Fiscal Studies, London, 2004), p 62 Back
