An IFS report shows the poorest retirees have seen smaller income increases than their wealthier peers

A new report shows that more retirees are falling into poverty and that more people are struggling to afford basic necessities and heat their homes.

The average income of the poorest pensioners has risen by 5 percent since 2011, compared with a 12 percent increase for all over-66s and 13 percent for the working population.

This is because, despite the increase in state pensions under the triple lock, they have not benefited from increases in private pensions or labour incomes as better-off pensioners have. In addition, more people are no longer eligible for means-tested state support such as pension credit.

“Pensions and pensioners’ incomes received little attention during the election campaign,” said Anna Henry, a research economist at the Institute for Fiscal Studies, the influential think tank that produced the report.

“That’s partly because people feel like retirees are doing better than others. And indeed, the gap between the average income of retirees and working-age people narrowed significantly, especially in the run-up to and during the Great Recession.

‘But the decline in pensioner poverty that we saw before 2011 has been gradually reversed. The new government will need to focus on the current and future challenges to pensioner incomes, particularly those on low incomes, and not assume that things will always get better.

‘A logical choice would be to take measures to increase the low percentage of people taking up pension credit, the main means-based benefit for poor retirees.’

The IFS report, which was funded by the Joseph Rowntree Foundation, also concluded:

– Relative poverty among pensioners has increased from 13 percent to 16 percent between 2011 and 2022. This amounts to 300,000 additional pensioners living in poverty.

– Average benefits received by pensioners, excluding the state pension, fell by 15 percent between 2011 and 2022. This is mainly because rising income from state and private pensions has reduced entitlements, rather than because benefits have become too generous.

– During the cost of living crisis, the relative poverty rate among retirees fell from 18 percent in 2019 to 16 percent in 2022;

– However, the percentage of pensioners who indicated that they could not afford essential material things rose from 6 percent to 8 percent during this period. The percentage of pensioners who could not afford to heat their homes rose from 2 percent to 5 percent.

The report on pensioner poverty is part of a wider IFS survey on living standards, poverty and inequality, to be published next week.

According to the IFS, poverty among pensioners has fallen in the decade to 2012, due to the emphasis on improving living standards, the introduction of pension credit and the increase in the state pension. Meanwhile, more people are retiring with income from a private pension.

But the report calls for more measures to tackle low take-up of pension credit, which is a drag on the government’s ability to reduce poverty among pensioners.

The IFS says that it is a problem across the benefits system that people are not claiming the support they are entitled to. More needs to be done to educate and inform people about what they can receive and to simplify the application process.

A Department for Work and Pensions spokesman said: ‘It is a priority for this Government to give the pensioners of today and tomorrow a better deal.

‘We are committed to the ‘triple lock’ principle and promote pension credit and its benefits, such as help with heating costs, to protect pensioners on the lowest incomes.’

Caroline Abrahams, chief executive of the charity Age UK, said: ‘It is now clear beyond doubt that the cost of living crisis is hitting many older people on low and modest incomes hard.

‘Many are still struggling, as their expenses are still much higher than they were before energy prices rose and inflation really picked up a few years ago.

‘At Age UK we’ve seen and heard it directly from older people, and this new report confirms it’s true.’

Abrahams urges the new Labour government to make serious efforts to increase the “disappointing” take-up of pension credit among pensioners, saying much more could be done to raise awareness and make it more accessible.

“Looking ahead, we should aim to change the way pension credit works so that older people are automatically eligible, without having to go through a cumbersome application process,” she says.

But Abrahams adds that this will not be enough on its own, as there are increasing numbers of pensioners whose incomes are just above the pension credit threshold but who still do not have enough to be financially independent.

‘This group that is just getting by also needs help, for example through targeted measures such as a social rate for energy.’

Morgan Vine, head of policy at the charity Independent Age, says the research showing the significantly wider gap between the poorest pensioners and those on average incomes is alarming.

“Living in financial difficulty, regardless of your age, can be an extremely isolating and miserable experience that undermines the joy of life,” he says.

‘Many of the elderly we speak to live on very low incomes and have to make do with just one meal a day, wash less often to save water and even avoid social contact because they cannot afford a cup of coffee.’

According to Vine, there are currently almost two million elderly people living in poverty. Pension credit is an effective way to help them out of it, if the current low rate of 63 percent is increased.