Reports and Briefing Notes

The implications of Government policy for future levels of pensioner poverty

Pensioner poverty has been falling over the last three decades in the UK, however, in more recent years, pensioner poverty levels have remained steady. For future pensioners, the approach to tackling pensioner poverty levels was driven by the recommendations of the Pensions Commission that have been translated into state pension reforms legislated in the Pensions Act 2007. The reforms already implemented have included, among other measures, a reduction in the required number of National Insurance Contributions’ (NIC) years to qualify for a full Basic State Pension (BSP) and the introduction of National Insurance (NI) credits to qualify for the BSP and the State Second Pension (S2P).

This report provides new evidence on how relative income poverty levels among pensioners could be affected under current policy. It also shows how pensioner income poverty levels may be affected under alternative policy scenarios, some of which are related to the latest proposals suggested by the Government. This report also assesses the trade-offs between the costs of implementing the different alternatives and their actual effect on reducing pensioner poverty levels.  The research was sponsored by Age UK.

Chapter one discusses what poverty is and how it can be measured. This chapter argues that relative income poverty measures can be an effective tool to measure and predict poverty levels.

Chapter two discusses recent trends in pensioner income poverty, it describes how state pension reforms may affect pensioner income poverty and it lays out the approach of this report.

Chapter three describes the methodological approach employed to measure relative income poverty. This chapter then analyses the impact of the current policy scenario on relative poverty as well as on pensioners’ income distribution and the percentage of pensioners entitled to means-tested benefits.

Chapter four analyses the impact of alternative policy scenarios that change the benefits within the current system on future pensioner income poverty levels. It also assesses the impact of such policy scenarios on pensioners’ income distribution and on the number of pensioners eligible for meanstested benefits.

Chapter five analyses the impact of alternative policy scenarios that introduce a single-tier pension under different variants on future pensioner income poverty levels. It also assesses the impact of such policy scenarios on pensioners’ income distribution and on the number of pensioners eligible for means-tested benefits.

Chapter six assesses the trade-offs in terms of the costs and the potential reduction in poverty levels of the different policy scenarios. This chapter also discusses the trade-offs involved around the elimination of means-tested benefits.

Press

Executive Summary