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BeeHive  >  BeeLines  >  2008  >  Jan  >  Below the Poverty Line

Below the Poverty Line

Right now in the 2007/8 tax year the Basic State Pension in the UK is 87.30 a week for a single pensioner. We all know that's below the government's recognised and so-called 'poverty level'. We know that because we read it in the Sunday papers all the time, but I guess the people who really 'know' that are the millions of pensioners in our country who need to get by on it.

The official poverty level is set at 60% of the median income of the population. Excluding housing costs that's 134 a week for a single pensioner. The Basic State Pension, even if you have made enough contributions to get the full amount, falls well short of that.

Average earnings are higher than median earnings. At the moment the Basic State Pension is about 15.7% of average earnings. That's set to fall to something like 14.2% by 2012 when the reforms going through in this year's Pensions Bill will ensure it stays at that low level compared to average earnings in the future (although there is a proviso that such generosity will be subject to affordability over time).

The 2012 reforms will once again link future increases to the Basic State Pension to increases to the general level of earnings. It was back in 1981, if you remember, that the link between the state pension and average earnings was broken. If that hadn't happened the Basic State Pension for a single pensioner today would be worth 142.75 a week. That would equal something like 25.6% of average earnings. It would also mean that we would have no need for the complex and convoluted system of means-tested handouts for pensioners that not only don't end up in the pockets and purses of all those who need them, but also present such unnecessary obstacles to those trying to save for their retirement too.

Official figures show that about one in five pensioners in our country live below the official poverty line; and sadly most of them are women. Indeed, in an answer to a Parliamentary question the current Pensions Minister, Mike O'Brien, said that 754,000 female pensioners aged between 60 and 69 today get no state pension at all because they failed to make the minimum qualifying 25% of contributions during their working lives. Means-tested handouts are, of course, the current answer to this acute problem. But it's a national disgrace, surely, that the system is so inefficient that 47% of pensioners who are entitled to them fail to claim their means- tested entitlements.

Our current and future pension problems all seem to me to stem from these two things. First, that the government before this one broke the link between the state pension and average earnings; and, second, that the current government has attempted to plug the gaps with complex means-tests rather than simply restoring the value of the basic pension. Those two major parties are now locked in a debate in Parliament about how this unholy mess can be sorted out. But all they're talking about really is how 'this' can be tweaked, or 'that' can be adjusted a bit in an effort to paper over the cracks when the real solution, surely, is staring us in the face.

Steve Bee

22 January 2008

Sources

1. National Pensioners Convention
2. The Pensions Policy Institute, Pension Facts, Basic State Pension

Any research and analysis has been provided by us for our own purposes and the results of it are being made available only incidentally.