Financial Security | The State of Ageing 2023-24

What does the chart show?

• Pensioner poverty rates have been rising in the UK over the past ten years, following nearly two decades of decline: 18% of pensioners (people over state pension age) are now in relative poverty after housing costs have been deducted (eferred to as ‘after housing costs’ [AHC]). This is equivalent to 2.1 million pensioners in the UK (1.8 million in England). 
• Pensioner poverty rates are around five percentage points higher than in 2012/13, when they were at a low of 13%. 
• Relative poverty rates of pensioners range from 15% among the youngest pensioners (aged 65 to 69, equivalent to 400,000 people) to 20% among pensioners aged 75 to 79 (490,000 people) and among pensioners aged 80 to 84 (360,000 people).  
• Of note is the five percentage point increase in rates of poverty (from 15% to 20%) among people aged 75 to 79 over the three-year period to 2021/22.  
• One in ten pensioners (10% or 1.1 million people) is in deep poverty (less than 50% of UK median income AHC). Since 2003/04, this number has consistently been between a minimum of 0.9 million and a maximum of 1.1 million people.   
• 600,000 pensioners are in very deep poverty2 (less than 40% of UK median income AHC). This is more than half (55%) of the 1.1 million who are in deep poverty and three in ten (29%) of those who are in poverty. 

We also know that:

• In the whole population of people aged 16 and over, relative poverty is most prevalent among working-age adults aged 60 and over, 25% of whom are in poverty. This is concerning because changes to the state pension age mean these people still have some time to wait before their state pension kicks in.
• We have already seen the impact of an increase in state pension age: increasing it by a year to 66 for men and women between December 2018 and October 2020 pushed up the absolute poverty rate for 65 year olds by 14 percentage points to 24% (or nearly 100,000 people) 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 their working part-time. Currently there is a three percentage point gap between the poverty levels of male (16%) and female (19%) pensioners and between their deep poverty rates (8% compared with 11%). 
• We also know that the poverty rate for single pensioners (25%) is almost double that for couple pensioners (14%) – a statistic that is concerning because the number and proportion of single older people is increasing. 
• One in ten pensioners is in persistent poverty (which is defined as being in relative poverty in at least three out of four years). This rises to 17% of single male pensioners and 18% of single female pensioners. 

What does the chart show?

• Pensioner poverty rates range from 15% in the South West of England to almost a quarter (23%) in London.
• After London, pensioner poverty rates are highest in the North East and in Yorkshire and the Humber, at 19%.
• Rates of poverty in the North East mirror the rates at which people self-report that they are not in good health (see here for people aged 50 to 64), consistent with the close two-way relationship between poverty and health, with poverty leading to poor health and poor health leading to poverty. 

We also know that: 

• Just 37% of people aged 50 and over in London own their homes outright (and therefore have no mortgage or rental costs), compared with 52% for England as a whole (see the Technical Report).
• In 2020/21, 37% of older private renters were in poverty after they had paid housing costs. We show here rates of poverty among people in the socially rented sector, which range from more than a third (36%) for 55-64 year olds to more than one in ten (12%) for people aged 75 and over.
• Thus, poverty rates in London may be the result of, or exacerbated by, high housing costs.
• It is also the case that there are large numbers of people with minority ethnic backgrounds living in London. Structural inequality and discrimination mean 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. They hence receive less than average pension income, with a knock-on effect on income in later life.  

What does the chart show?

• People from minority ethnic backgrounds are more likely than White British people to be in poverty and deep poverty. 
  • One in five people (20%) aged 50 and over is in relative poverty (less than 60% of median household income) and 13% are in deep poverty (less than 50% of median household income). However, rates vary greatly by ethnic group. 
  • Among people aged 50 and over, Pakistani and Bangladeshi people have the highest rates of poverty and deep poverty: 44% of Pakistani people and 34% of 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. 
• Among people from Pakistani, Bangladeshi, Other Asian and Black African/Caribbean backgrounds, rates of deep poverty are substantially higher in the under 50 than the over 50 population. Therefore, as those people get older there is the potential for increasing pensioner poverty in the years to come unless efforts are made to reduce levels of poverty in this cohort before they reach later life.  

What does the chart show? 

• The poorest pensioners are most likely to have no private (or workplace) pension. The proportion of people without a private pension ranges from just 7% of pensioners with the highest 20% of incomes to more than two in five pensioners with the lowest 20% of incomes. 

 We also know that: 

• There are 2.9 million pensioners with no private or workplace pension, who are therefore fully reliant on state pension (plus other benefits for which they may be eligible).
• Almost 1 million of the poorest pensioners have no private or workplace pension.
• Participation in workplace pensions varies (at least in part because of the requirement to exceed a minimum earnings threshold for automatic enrolment):
  • Workplace pension participation is highest in Professional occupations (91% of eligible employees) and lowest in Elementary occupations (81% of eligible employees). It is also higher among higher than lower earners.
  • Part-time workers are less likely to have a workplace pension than full-time workers (84% of female part-time vs 90% of female full-time; 74% of male part-time vs 89% of male full-time). That means there is a notable gender difference between female and male part-time workers.
  • When we compare by ethnic group, we see that White British people have workplace pension participation rates of 86% over the 2019/20 to 2021/22 period, compared with 74% for people from Pakistani and Bangladeshi backgrounds.  

What do the charts show?

• The income available from private and workplace pensions mirrors participation rates. Hence, there are a number of groups – said to be under-pensioned – who have lower than average income from pensions: 
  • Incomes from private/workplace pensions among these groups range from 36% of the population average (for Disabled people) to 72% (for carers).  
  • When income from state pension and other benefits is combined with private/workplace pension income, the gap between these under-pensioned groups and the population average gets smaller but remains: the total pension incomes of under-pensioned groups range from 78% of the population average (for the self-employed) to 94% (for Disabled people).  
• Looking more closely at gross income from selected sources among pensioners from different ethnic groups: 
  • Total income from all sources is lowest for Asian/Asian British pensioners.  
  • Income from state pension also varies and is not constant across population groups. The average income from state pension for African/Caribbean/Black British and Asian/Asian British pensioner units (that is, single pensioners or pensioner couples) is £160 and £155 per week, respectively, compared with £215 for White pensioners.  

We also know that: 

• 98% of White pensioners in the UK received their state pension in the period 2019/20 to 2021/22, compared with 84% of Asian pensioners and 91% of Black pensioners. This, at least in part, explains why the average amount received by pensioners from these ethnic backgrounds is lower than for White pensioners.
• However, it is also the case that the amount of state pension people receive depends on how many ‘qualifying’ years of National Insurance payments they have (the number of years varies for men and women and by year of birth). 
• Labour market inequalities across the life course that impact employment history and pay will impact those contributions: for many, multiple factors, including age, race, gender, disability and patterns of migration combine to amplify inequalities.
• Of the estimated 3.1 million people receiving the new state pension5 in November 2022, only half received the full amount.

What does the chart show? 

• Carers are an under-pensioned group: this is likely the result of balancing work and care causing fragmented work histories and low incomes. Low income impacts people’s ability to make pension contributions during working life and low pension provision in turn leads to low income in later life:   
  • 30% of female and 21% of male carers aged 60 to 64 receive a net weekly income (that is, income after tax) of less than £99 per week.  
  • Almost two-thirds of female carers aged 75 and over have a net weekly income of less than £199 per week, compared with less than half of male carers at this age.  
  • The proportion of carers aged 75 and over who make less than £199 per week is higher than for any other age group. 

We also know that: 

• The average gross weekly income of all pensioners is £376 per week. Younger pensioners have higher average incomes than older pensioners: those aged under 75 have average gross weekly incomes of £389, compared with £322 for pensioners aged 75 and over. 
• So even allowing for taxation, it is clear that the incomes of a large proportion of pensioner carers are substantially lower than those of pensioners on average.
• There is also a significant financial cost associated with caring, with carers often having to pay for services and equipment out of their own pockets.
• This data is consistent with data showing that almost a quarter of pension-age carers are in relative poverty (24% of women and 23% of men), compared with 21% of pension-age women and 17% of pension-age men who are non-carers.  

• The Minimum Income Standard (MIS) is the income that people need to reach a minimum socially acceptable standard of living in the UK today, based on what members of the public think. It is calculated by specifying ‘baskets’ of goods and services required to meet these needs and to participate in society.
• Almost all households in relative poverty are also below the MIS. That is, households in relative poverty are generally unable to reach an acceptable standard of living as defined by members of the public.
• Currently (2023), the MIS for a single pensioner is £256 per week and that for a pensioner couple is £401 per week.  
• The MIS has increased year on year for all household types as the cost of what is needed for a minimum socially acceptable standard of living has increased substantially: between 2022 and 2023, the MIS increased by 12.7% for a single pensioner and by 12.3% for a couple pensioner.   

What does the chart show?

• In 2023, a single pensioner could only reach 80% of the MIS through their full state pension, with or without a Pension Credit top-up. 
• For a pensioner couple, state pension with or without Pension Credit covered just 81% of the MIS. In both cases, this was the consequence of increasing costs and came despite a 10.1% uprating of state pension and other benefits in April 2023.
• The proportion of the MIS covered by state pension with or without a Pension Credit top-up has declined over time, from 95% for a single pensioner and 92% for a pensioner couple in 2021. Therefore, pensioners solely reliant on state pension and benefits will have had to cut back on spending that is viewed as essential to attain a minimally acceptable standard of living.  

We also know that:

• The UK has among the worst mandatory (state) pension provision across OECD nations. In 2021, UK pensioners got 49% of their income from the state, compared with an OECD average of 52%. 
• In 2020/21, 15.4% of pensioners (1.8 million people) were living in households with incomes below the MIS, an increase of 400,000 since 2008/09.  

Pension Credit tops up weekly income to £201.05 for a single person and tops up joint weekly income to £306.85 for a couple. 

What does the chart show?

• For people on a low income, state pension can be topped up through Pension Credit once a person reaches state pension age (though not up to the level of the new state pension).
• Although take-up of Pension Credit is at its highest level since 2010, with 1.4 million pensioners in Britain receiving it, 1 million eligible people (150,000 single men, 450,000 single women and 400,000 people living as couples) did not claim it in the financial year ending 2022. Taking the upper limit of the possible range of non-recipients shows that there could be as many as 1.2 million people (living in 880,000 households) who are missing out on Pension Credit. 
• £1.7 billion of available Pension Credit remains unclaimed per year.  
• It is notable that three times as many single women (450,000) as single men (150,000) are not receiving Pension Credit to which they are entitled. This compounds the financial disadvantage faced by older women as a result of fragmented work histories. 

What does the chart show?

• Average wealth increases with age, but so too does the gap between the richest and poorest. 
  • The difference in the total average value of the assets of the poorest 25% (poorest quartile) and richest 25% (richest quartile) of people aged 35 to 44 years old is about £11,000, while that for people aged 65 and over is £35,000. 
• Wealth inequality within age bands is greater than between age bands.  
  • The difference in the total average value of the assets of the poorest quartile of 35-44 year olds and the poorest quartile of people aged 65 and over is £800, while that between the richest quartile of 35-44 year olds and the richest quartile of people aged 65 and over is £25,000. 

We also know that:  

• In ‘The State of Ageing 2022’, we included an analysis of 2018-20 data that covered housing wealth. This showed the same pattern as above, but the differences – both within each age group, and between age groups for a given wealth quartile – were more extreme.  
• In this analysis (which included property, private pensions, and financial and physical items), wealth was estimated to be: 
• Average wealth increases with age, but so too does the gap between the richest and poorest. 
  • £101,000 lower for women than men  
  • £65,000 lower for individuals with a long-standing illness or disability than those without 
  • £65,000 lower for individuals identifying as bisexual compared with those identifying as heterosexual 
  • Lower for individuals from the Pakistani, Indian, Other Asian, White and Black African, Black African and Other ethnic groups, compared with the White British ethnic group 
• Women in their late fifties have less than two-thirds the pension savings of men, largely due to labour market inequalities and gendered divisions of labour.  

Savings act as a buffer in the event of unexpected expenses or a loss of income and can offer some financial security. This buffer can prevent people from falling into debt, a situation that is hugely stressful for individuals and households, and can lead to depression and anxiety, in turn impacting physical and mental health. Precautionary savings are important in preventing people from falling into poverty but are not the same as saving for retirement through pension provision.   

What does the chart show?

• 11% of pensioners (1.3 million people) have no savings. 
• More than a quarter (27%) of pensioners (3 million people) have less than £1,500 in savings.
• One-third of pensioners (almost 4 million people) have less than £3,000 in savings.
• Almost half of pensioners (49% or 5.8 million people) have less than £10,000 in savings. 
•  

We also know that:

• People in very deep poverty who had managed to save some money in the previous year were around half as likely to be behind on bills as those who had not saved. And having savings to fall back on can help protect people from falling into deep poverty. But, of course, people on low incomes and at risk of falling into deep or very deep poverty are unlikely to be in a position to save in the first place.
• The pandemic had a significant impact on increasing inequality in the levels of household savings: the average level of savings across the country increased, driven by increased saving among higher-income households whose spending was curtailed. But low-income households were most likely to have lost work or been furloughed, losing income and hence savings.  

What does the chart show? 

• Housing tenure has a huge impact on levels of savings: among people of all ages, social renters are the most likely to have no savings (54%), followed by private renters (35%).
• Even among people who own their own homes with a mortgage, one-quarter (24%) have no savings; among people aged 50 to 69, this proportion is 27%; and among people aged 70 and over, it is almost one in five.  

We also know that:

• This data is consistent with evidence that, in 2020/21, 37% of pension-age adults renting privately were in poverty. 
• One in five owner-occupied homes headed by someone aged 75 and over is in poverty and, of the 1.8 million homes headed by someone aged 55 and over and living in poverty, most (1.2 million or 68%) are owner occupied.
• Older private renters spend almost half of their income on rent (exclusive of housing support).
• More than one in five older women who rent privately have less than £100 left each  month after paying rent.
• Almost half of all retirees (49%) in the private rented sector believe their quality of life is significantly impacted by their housing costs. 
• Almost half (48%) of older private renters worry about getting into debt due to their housing and other living costs being too high. 
• More than three-quarters (78%) of older private renters who are currently working worry that their future pension will not be able to meet increasing rent prices. 
• Half of social renters (49%) and 43% of private renters aged 50-69 say that they feel they have no control over their financial situation, while this is the case for just one in five people in this age group who own their homes outright

What does the chart show? 

• In every age group, the percentage of people with no savings is greater if there is a Disabled adult in the household than if there is not. The difference is largest for the 50-69 year old age group, for whom there is a twofold difference (31% vs 16%). 

We also know that:

• This data is consistent with data showing that more than one in five (22%) Disabled pensioners is in poverty, compared with 17% of non-disabled pensioners. 
• This situation is driven by the fact that disabled households (with at least one Disabled adult or child) need an additional £975 a month, on average, to have the same standard of living as non-disabled households.
• We repeatedly see a difference between households with and without a Disabled household member in our analysis of the data from the abrdn Financial Fairness Tracker:  
  • For example, households with at least one Disabled household member are more likely than those without to be unable to meet an unexpected expense (25% vs 13% of households where the respondent is aged 50 to 69). 
  • The proportion of 50-69 year olds who feel they have no control over their financial situation is twice as high if they or someone in their household is disabled (40% vs 20%).  

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. 

What does the chart show? 

The 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. For example: 

• A third of people aged 50 and over have reduced the number of baths or showers taken, and around 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 have not seen friends or family as often as they would like; and a quarter have cut down their participation in hobbies or pastimes. 
• These proportions differ enormously according to the financial wellbeing of the household, with poorer households (those in serious financial difficulties or struggling) 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 because there was not enough money for food; almost seven in ten cut back spending on food; half reduced the frequency of baths or showers; one in five avoided going to the doctor; and more than three in five did not see family or friends as much as they would like.   
  • Compared with people aged 50-69, an even higher proportion of those aged 70 and over who are in serious financial difficulties cut back spending on food (78%); reduced the use of the cooker or oven (73%); and cut down participation in hobbies or pastimes (64%).
• The cost of living crisis will inevitably impact people’s ability to save and to contribute to a pension; by most affecting those who are already in financial difficulties or struggling, it will only serve to increase pension inequalities over the long term. 

We also know that: 

• Across tenures, people living in the private rented sector have been hardest hit by the cost of living crisis, consistent with the higher rates of relative poverty in this sector. Thus:   
  • Three in five private renters aged 50-69 (60%) reduced the use of their cooker or oven, compared with less than half (46%) of those who own their homes outright. 
  • 40% of people aged 50-69 living in the private or socially rented sector reduced the amount of money spent on food, compared with less than a quarter (24%) of those who own their homes outright. 
• There are differences too depending on whether there is someone in the household who is disabled: 
  • 57% of households aged 50-69 that have a Disabled household member have had to cut back on eating out and takeaways, compared with 40% who do not.  
  • 33% vs 16% have not seen friends and family as much. This is very significant because Disabled people are already more likely than non-disabled people to report being socially isolated, meaning the cost of living crisis is putting them at considerable risk of social isolation.  
• There is an abundance of qualitative evidence that illustrates the lengths to which people are going to cope with increased food costs. Many people are shopping at cheaper supermarkets, shopping later in the day for reduced items, and travelling to large supermarkets rather than shopping locally.  
• For older Disabled people who are limited in their ability to travel, having to shop  locally for food and essentials could exacerbate the disability price tag, as too does the imperative for online shopping.  
• Moreover, some people with health conditions or physical impairments might  require particular foods with additional financial costs.
• Not eating enough food or the right food can clearly lead to changes in weight and nutritional deficiency, which are in turn detrimental for physical health. Food insecurity is also a source of constant stress and anxiety.  

Retirement Living Standards (RLS) 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 February 2024. They consider what is needed for spending on our homes, food (both grocery shopping and eating out), transport, holidays and leisure, clothing and personal items, and helping others. 

What does the chart show?

• The annual cost of a moderate standard of living in retirement for a single person in 2023/24 is £31,300, an increase of £8,000 (or 34%) since 2022/23.
• The annual cost of a moderate RLS for a couple in 2023/24 is £43,100, an increase of £9,100 (or 27%) since 2022/23.  
• The amounts required to achieve both a minimum and a comfortable RLS have also increased, though by less than for a moderate RLS: these increased by 13% and 16%, respectively, for a single person and by 13% and 8% for a couple.
• In April 2024, full state pension will increase to £11,500 per person, which is almost £3,000 short of the £14,400 required for a minimum RLS.  
• The increase in the moderate RLS has been ascribed to rising living costs as well as to changing expectations of what is desirable in retirement. In particular, the research found that people place increasing importance on spending time with family and friends outside the home, and expect a monthly meal out with loved ones.  

We also know that: 

• For the first time, in 2023, a moderate RLS included £100 a month to take family or friends out to eat. But our analysis of data from the abrdn Financial Fairness Tracker shows that 62% of adults aged 50-69 who are in serious financial difficulties have not seen friends or family as often as they would like, and 75% have cut back on eating out. So the very things that have been identified as important to achieve a moderate standard of living in retirement are the same things that the poorest in society are having to give up.  
• It is also the case that, for the first time, £1,000 to support family members was added to the budget for a moderate and comfortable RLS. There was a very strong feeling that it was important to be able to provide financial support to others, particularly younger family members, with things such as clothes, school trips and uniforms for grandchildren. This illustrates the sharing of wealth across generations. 

What does the chart show? 

• Almost everyone (93% of the under fifties and 88% of the over fifties) who is in serious financial difficulties says that thinking about their financial situation makes them anxious.
• This is also the case for more than two-thirds of people aged 69 and under who are struggling financially and half of those aged 70 and over. 

We also know that: 

•  The cost of living crisis has impacted people’s physical and mental health:    
  • More than a quarter of people aged 50-69 say their financial situation is making their mental health worse, but this increases to 80% of those who are in serious financial difficulties.
  • Almost a quarter of people aged 50-69 say their financial situation is making their physical health worse (23%), but the levels are three times higher (72%) for people in serious financial difficulties. 
• There are also differences according to people’s housing tenure, reflecting the association between tenure and financial wellbeing:   
  • More than two in five people aged 50-69 who are private or social renters say that their financial situation is making their physical health worse, and almost half say that it is making their mental health worse.
• There are also differences according to whether the household has a Disabled member:   
  • More than a third of people aged 50-69 in households with at least one Disabled person say that their financial situation is making their physical health worse, compared with one in ten of those in non-disabled households.  
  • 40% of people in this age group in households with at least one Disabled person say that their financial situation is making their mental health worse, compared with 16% in non-disabled households.   
•  A survey by the Royal College of GPs shows a rise in the number of patients seeking help with problems linked to the rising cost of living. 
• Together with a new modelling study that shows that premature deaths (people dying before the age of 75) will increase by 6.5% this year (in Scotland) due to the cost of living crisis, this data indicates that the cost of living crisis is set to exacerbate already gaping health inequalities.  
• Hence, poverty is a public health issue: it is the biggest driver of poor health and consequently of pressure on the NHS. In 2016 it was estimated that poverty costs the NHS £29 billion per year, a figure which will have increased considerably since that time. But poor health can also trap people in poverty – making it harder for people to access social and economic opportunities, such as secure and good quality work.