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Last updated April 2009

FIVE POUNDS A WEEK

ON THE STATE PENSION

£500b TO THE BANKS IN OCTOBER

AND THAT WAS JUST A START

£3b per year on Iraq and Afghanistan

Chris Perry

The weekly full basic State Pension increased by five per cent from £90.70
to £95.25 - almost an extra £5 a week – for around 12 million older people from April 5^th 2009. The means tested top up, Pension Credit, increased to £130 a week, or £198 for couples. The new rate represents an increase of five per cent in line with last September's Retail Prices Index.

However this still leaves 2.8m older people living below the European poverty line - an income of less that 60% of National Average Earnings, with people with less than 50% of National Average Earnings being in severe poverty.

What would be required to lift older people out of poverty?

The results of the 2008 ASHE show that median weekly pay for full-time employees in the UK grew by 4.6 per cent in the year to April 2008 to reach £479. The top 10 per cent of the earnings distribution earned more than £946 per week, while the bottom 10 per cent earned less than £262. Median full-time weekly earnings in London were £613, significantly higher than in other regions, where they ranged from £418 in Northern Ireland to £500 in the South East.

Therefore a State Pension of £287.40p per week (60% of £479), and £300 in the South East would be required to lift older people out of poverty.

Recent research by the Friends Provident concluded that the UK's state pension was not capable of providing sufficient support for people in their old age and should be doubled. Respondents to the survey said that, on average, £832 a month would be enough to provide a comfortable living. This is almost £440 more than is given to older people in the UK.

Of those questioned 57 per cent said that they were not planning to use any other means to survive once they are retired.

The consequence of removing the Earnings Link in 1981

Had the earnings Link not been removed in 1981 the State Pension, without means testing, would have been £154 prior to the recent increase (compared with an actual pension of £90.70p.)

The following table, produced courtesy of the National Pensioners Convention shows the progressive erosion since the earnings link was removed in 1981.

Basic State Pension Level

(actual and if link with earnings not broken)

The National Pensioners Convention is calling for an immediate increase to £165 per week.

The cost of restoring the pre 1981 level would be £12b per year – it is estimated that retired people contribute £24b to the economy each year as child minders, volunteers and carers.

Older People hit particularly hard by the recession

In the last eighteen months a further 600,000 older people in Britain have fallen below the official European poverty line bringing the total number of older people in Britain living in poverty to 2.8 million - of whom one million were in severe poverty. But even this may not be the true picture. If you are living near, or below, the poverty line there is not much left by the time you have paid your Council Tax, Gas, Electricity and Water Bills and bought food – and yet these are the commodities which have gone up in price the most.

Low interest rates have affected those people who thought they had made provision for their retirement and were relying on their savings for income and falling stock markets have further undermined occupational pension funds – which were already in difficulty.

Where does Britain Stand?

Britain, the fourth largest economy in the world is ranked 27^th in the world in respect of its State Pension with the highest winter cold related death rate in Europe – higher than the Scandinavian Countries. There is a correlation between income and demand upon the health services in all age groups and it is thought that many older people might be spending 25% less on food per week than is required for a nutritional diet.

In a recent survey of 2,656 people, 90% thought that older people should get an adequate income without means testing compared with 96% of delegates at Age Concern Hampshire’s 2005 Conference. And 45% of older people claimed they were put off claiming benefit by means testing.

Increased longevity of life was arguably the greatest achievement of the twentieth century and undoubtedly the biggest challenge of the 21^st. 

There is a clear correlation between income and demand upon the NHS in all age groups. Rather than adding healthy years we are adding ill health.  According to Carol Jagger, professor of epidemiology at Leicester University, British men spend, on average, the last 19.2% of their lives in ill health compared with Italian men who spend the last 7.6% and the European average of 15.1%. British women spend, on average, the last 24.5% of their lives in ill health, compared with Italian women who spend the last 9.8% and a European average of 18.7%. The Health Survey of England, published in April 2007, which provides an authoritative snapshot of the health of people over the age of 65 years, found that 40% had functional limitations (mainly mobility problems), 10% had symptoms of depression (and there was increasing concern about rising suicide rates amongst older people) and, in some regions, 33% had undiagnosed high blood pressure. It concluded that all these health problems could be avoided by better health promotion and improved practice through primary care.

The way forward

A year ago the National Pensioners’ Convention launched a campaign replicating that leading up to the first State Pension consequent upon the enactment of the 1908 Old Age Pensions Act, in 1909.

Early Day Motion 658 called for a basic State Pension above the official poverty line of £134 per week (although this has now been over taken by inflation and the NPC is calling for £165), for all men and women, increased annually in line with earnings. (When the earnings link was removed the basic State Pension, without means testing, was 24% of the then average national earnings, it is now 18% and by 2012, when the Government may consider reinstating the link, it could be as little as 12% - compared with 70% across much of Europe – the European definition of poverty is less than 60% of average national earnings – less than 50% is severe poverty)

Work and Pensions are inextricably linked and come under the same Government Department and Minister so how can we get into the situation described in our lead story.

Age Concern Hampshire believes that retirement should be a positive choice by the individual taking into account the pension they will get, their job satisfaction, health and personal circumstances and payment of the State Pension should be dependent upon retirement and not age. This would take the pressure off state, occupational and private pension funds, with no need to raise the minimum age of entitlement and an adequate income would not only enhance the quality of life but produce consequential savings in may other areas – particularly in the NHS.