Financial Security | The State of Ageing 2023-24
We examine why so many older people face significant financial inequality and are not prepared for their retirement. We’ll be releasing a full chapter containing further data and analysis in 2024.
The State of Ageing 2023-24 is the most detailed, varied and up-to-date report about ageing in England.
You can navigate through the full report using the purple content footer. Hovering over the graphs reveals more data, and you can get more information by clicking the ‘find out more’ buttons.
- Relative pensioner poverty rates stand at almost 18%, close to the highest levels seen in the past 15 years. However, the highest poverty rates among people aged 16 and over are among people aged 60-64 – 25% of whom are in poverty.
- Some groups, including people from some minority ethnic backgrounds, are at particular risk of pensioner poverty: people from Bangladeshi and Pakistani backgrounds experience the highest rates of poverty and are also most likely to be living in deep poverty.
- For people from minority ethnic backgrounds, the ethnicity pay gap plays a role in levels of pensioner poverty.
- Working histories that include long periods out of work or part-time work also mean many people, especially women, do not meet the threshold for auto-enrolment (£10,000 per year salary) into workplace pension schemes.
- While auto-enrolment into workplace pensions has transformed the pension landscape, there are still too many people with inadequate pension provision: around a third of the poorest pensioners have no occupational or personal pensions.
- This matters because the UK has among the worst mandatory (state) pension provision across OECD nations: the full state pension of £10,600 per year in 2023-24 does not meet even the minimum Retirement Living Standard for a single pensioner.
- The cost-of-living crisis is significantly compounding the financial vulnerability of the poorest in society. Large proportions have cut back on spending, for example, spending less on food, avoiding going to the dentist and even not seeing family and friends as often. This current crisis is likely to exacerbate the under-pensioned gap by affecting people’s ability to save into a pension, leading to greater financial inequalities over the long term.
- Several trends also cause concern for future rates of poverty and financial vulnerability among older people:
- Increasing rates of private renting among older people mean more pension-age people will need to cover the costs of private rental accommodation over the coming years. Private renting is associated with poverty – currently 37% of privately renting pensioners are in poverty. And people from minority ethnic backgrounds – many of whom are already disadvantaged by low wages, low pension provision and low savings – are most likely to be renting privately. For example, almost 22% of Black African people aged 50 and over are privately renting.
- It’s also the case that while a majority of people aged 50 and over (11.4 million) own their home outright, there are still 4.6 million people in this age group with mortgages, including more than a quarter of people aged 75 and over from Bangladeshi backgrounds. A survey of mortgage holders by KPMG found that 11% had cut their pension contributions to cope with higher monthly mortgage payments.
- Also, as outlined here, employment levels among people in mid-life and beyond have dropped and remain lower than pre-pandemic. With people often underestimating their life expectancy after retirement and how long a period their retirement income needs to cover, this will have a clear knock-on effect on savings and pensions.
What needs to happen
The UK government should:
- Pause proposals to raise the state pension age until there is a plan in place to ensure that any changes do not push significant numbers of people into poverty. For this to be the case, it must be matched with a considerable improvement in access to work for people in their 60s, and a holistic review of how our social security system supports us as we age. Our research found that nearly 100,000 more 65-year-olds were in poverty due to the most recent rise in state pension age to 66 between December 2018 and October 2020. Given people in their early 60s are already experiencing the highest poverty rates of any adult age group, this cannot be allowed to happen again.
- Increase the uptake of Pension Credit and ensure the poorest pensioners aren’t missing out on benefits they’re entitled to. An estimated 850,000 eligible households are not claiming their Pension Credit entitlement. We support Independent Age’s call for the Department for Work and Pensions to produce a strategy to address this – one that sets realistic measurable targets to increase uptake. This must include both short-term activities, like targeted awareness-raising campaigns, and longer-term solutions, such as (partial) automatic payment.
- Support pensioners from minority ethnic backgrounds who are most at risk of poverty to claim Pension Credit. Independent Age has set out how this could be done, including though tailored government messaging and communications, accessible information in a range of languages and a variety of formats such as audio and video, and grant funding for local voluntary-sector organisations that provide trusted in-depth support in minority ethnic communities.
Almost one in five pension-age adults live in relative poverty
What does the chart show?
- 18% of people of pension age are in relative poverty (defined as income below 60% of median income after housing costs).
- The proportion of people of pension age who are in poverty remains similar to what it was in 2019/20 where we saw a spike in pensioner poverty rates.
- Pensioner poverty rates are around four percentage points higher than in 2012/13 when they were at a low of 13%.
We also know that:
- Among pensioners, relative poverty is highest among the oldest pensioners: about one in five people aged 75 or older are in relative poverty. But in the whole population of people aged 16 and over, relative poverty is most prevalent among working age 60-64 year olds, 25% of whom are in poverty. This is concerning because changes to the state pension mean these people still have some time to wait before their state pension kicks in.
- The increase in state pension age by a year to 66 for men and women between December 2018 and October 2020 pushed up the absolute income poverty rate for 65-year-olds by 14 percentage points, or nearly 100,000 people, to 24% by late 2020
- Women who have reached state pension age are more likely to be living in poverty than men. This is because they generally live longer and have less complete national insurance contribution histories than men, the result of their lower overall earnings, time off for childcare and other caring duties, and a greater likelihood of working part-time. Currently there is a three-percentage-point gap between the poverty levels of male (16%) and female (19%) pensioners.
Over a quarter of people aged 50 and over from Pakistani and Bangladeshi backgrounds live in deep poverty
What does the chart show?
Households living on less than 60% of the median household income are defined as living in poverty, and those living on less than 50% of the median household income are defined as living in deep poverty.
- One in five people (20%) aged 50 and over are in relative poverty and 13% are in deep poverty.
- However, rates vary greatly by ethnic group:
- Pakistani and Bangladeshi people aged 50 and over have the highest rates of poverty and deep poverty: 43.5% of Pakistani people and 34.5% Bangladeshi people aged 50 and over are in poverty, and more than a quarter of both groups are in deep poverty.
- The lowest rates of poverty among people aged 50 and over are seen in the White population, 18% of whom are in poverty and 12% in deep poverty.
We also know that:
- People from minority ethnic backgrounds do not earn the same as the British average or as the White majority in the same age group. Hourly pay gaps relative to the White majority are currently 16% for Pakistani people, 15% for Mixed White and Black African people, 15% for Bangladeshi people and 13% for Mixed White and Black Caribbean people. These are the ethnic groups with the largest ethnicity pay gap.
- In addition, structural inequality and discrimination means that people from some minority ethnic groups are more likely than the UK average and the majority White population to be unemployed, self-employed or to work part-time.
The full state pension alone does not allow pensioners to achieve even the minimum Retirement Living Standard
What does the chart show:
- Retirement Living Standards have been developed to act as guides to help people understand how much money they will need to live the lifestyle they want in retirement. They are calculated assuming people are mortgage and rent free. They provide three levels of expenditure – minimum, moderate and comfortable – that vary depending on whether a retired person is living as a single person or in a couple and were most recently updated in April 2022.
- In April 2021 the new full state pension increased by around 2.5%. However, the income required to achieve all living standards rose significantly more than this over the previous year. The highest percentage rise was for the minimum income standard: a rise of 17% for single pensioners and 18% for couples. This indicates that the poorest pensioners saw the greatest increase in cost of living.
- The full state pension rate for both couples and single people is below the minimum Retirement Living Standard. The gap between the state pension and the Minimum Retirement Living Standard for single people almost doubled from £35 to £66 per week between years ending April 2021 and April 2022.
We also know that:
- The gap between the state pension and the Minimum Income Standard (equivalent to the Minimum Retirement Living Standard) has increased further in 2023 for single pensioners and pensioners who were in receipt of cost-of-living payments last year.
- Equivalised income is a measure of household income that takes account of the differences in a household's size and composition. It is made equivalent across household sizes and compositions. The average equivalised annual household disposable income of all retired people ranges from £12,300 for people in the bottom quintile (i.e. the poorest 20%) to £61,900 for those in the top quintile (the richest 20%). This means the income of the poorest 20% of pensioners doesn’t even meet the minimum Retirement Living Standard.
- The same data shows that 60% of people’s income is at or below the moderate income standard. The UK has among the worst mandatory (state) pension provision across OECD nations. In 2021, pensioners got 49% of their income from the state compared with an OECD average of 52%.
- Payment of the full state pension is dependent upon an individual’s National Insurance record. Those eligible for Pension Credit can top up their incomes, although not up to the level of the New State Pension, on the basis of low income alone. Although nearly 1.4 million pensioners in Britain receive Pension Credit with take-up at its highest level since 2010, it is estimated that up to 850,000 eligible households are not claiming Pension Credit, with up to £1.7 billion of available Pension Credit unclaimed.
Around four in ten of the poorest pensioners have no occupational or personal pensions
What does the chart show?
- More than two in five pensioners in the bottom quintile by net equivalised disposable household income have no occupational or personal pensions compared with 7% in the wealthiest 20% of the population.
We also know that:
- Auto-enrolment has transformed the pension landscape. Over 10.8 million people have been automatically enrolled in their workplace/occupational pension, while pension participation in the private sector for eligible employees has increased from 41% in 2012 to 86% in 2021.
- But there are still too many people who are under-pensioned. Although 64% of pensioners received an occupational pension income in 2022, and 71% of pensioners received a private pension income, 2.9 million pensioners are still without such income and are thus reliant on the state pension and Pension Credit.
The cost-of-living crisis
Those in serious financial difficulties have been most affected by the cost-of-living crisis
What does the chart show?
- The current cost-of-living crisis* has had a major impact on people’s lives, with people taking a wide range of steps to minimise their spending.
- A third of people aged 50-69 are taking fewer baths or showers and two-thirds have avoided turning on the heating or turned it on less than usual.
- One in five people aged 50-69 have avoided going to the dentist. A quarter haven’t seen friends or family as often as they’d like. And a quarter have also cut down their participation in hobbies or pastimes.
- But these proportions differ enormously according to the financial wellbeing of the household. Poorer households (those in serious financial difficulties or struggling) are most vulnerable to the effects of the cost-of-living crisis:
- Almost half of people aged 50-69 in serious financial difficulties ate less than they felt they should have because there wasn’t enough money for food. Almost 70% cut back spending on food, while 61% reduced the frequency of baths or showers and 62% didn’t see family or friends as much as they’d like.
- Compared with people aged 50 to 69, an even higher proportion of those aged 70 and over who are in serious financial difficulties cut back spending on food (78%), cut down participation in hobbies or pastimes (64%) and reduced car use or other forms of transportation (46%).
We also know that:
- While this data shows variation by financial wellbeing category, it does not reveal the particular issues that affect people from minority ethnic groups. For example, food is connected to sense of identity and so access to it is important to wellbeing. But culturally-specific food is often imported and more expensive, so buying it is an even bigger challenge for those in financial difficulties or struggling. However, minority ethnic communities underuse food banks: cultural issues are a factor in this, indicating the need for age-friendly, culturally appropriate community food projects.
- Almost half a million people in the UK have their heating supplied through shared heat networks. While these can potentially contribute to net zero targets and reduce heating bills, individual consumers are not able to regulate their own energy consumption, and therefore their bills. Many low-income customers are facing huge rises in energy bills as a result.
*The ‘cost-of-living crisis’ refers to the fall in ‘real’ disposable incomes (that is, adjusted for inflation and after taxes and benefits) that the UK has experienced since late 2021. With prices steadily increasing, household incomes have not kept up with living costs