Finance

Analysing the rise in pensioner poverty

Common perception these days is that of an inter-generational wealth divide, whereby pensioners are deemed to have it good, while millennials and Generation Z have a hard time making ends meet. Statistics, as ever, can be interpreted to support or contradict this view, depending on one’s predisposition to the matter. 

However, there was an interesting release from the Office for National Statistics (ONS) last week, as it revealed that the number of people aged 70 and over in full or part-time work has more than doubled over the past decade. The resultant figure of just under 500,000 workers aged 70+ in Q1 of this year represents a 135 per cent increase on Q1 2009. Put another way, it means that 1 in 12 Brits in their 70s are currently still working, compared with 1 in 22 ten years ago.

There is also an even spread from a gender standpoint, with 137 per cent growth in the number of men aged 70+ remaining or entering into work during this period, and 131 per cent growth among women.

What do the numbers tell us?

There are a few ways to analyse this. On one hand, you may consider these kinds of numbers as a force for good. It is widely believed that health and social benefits are associated with continued work - not to mention the ability to top up pension pots too. Alternatively, some may argue that this is simply a natural consequence of an ageing population, coupled with rising life expectancies.

Yet a more disconcerting perspective is the correlation between the increase in the number of working people over the age of 70 and the rise in pensioner poverty. A recent study by the Joseph Rowntree Foundation found that 16 per cent of pensioners were living in relative poverty in 2016/17, or just under 2 million people. (ie: an income of less than 60 per cent of the median among pensioners, after housing costs.)

Indeed, it marks a clear reversal in fortunes, with pensioner poverty having declined steadily (by half) over two decades until 2012/13, but climbing each year since. For those pensioners living in social housing, the number in relative poverty rises to 31 per cent, while among those who rent privately, this figure stands at 36 per cent.

Absolute poverty rates - which equate to earnings of less than 60 per cent of the median of general household income - has fallen by 1 per cent over the past five years. But even this is far slower than previous years. For example, between 2002-03 and 2007-08 the rate of absolute pensioner poverty dropped by 12 per cent, while even in the wake of the financial crisis, it fell by 3 per cent between 2007-08 and 2011-12.

Could it be that pensioners are continuing to work purely out of necessity, and a desperate fear of running out of money in old age? It is undoubtedly a plausible hypothesis. Among the headwinds pensioners must deal with are falling rates of home ownership, higher rental costs and, more controversially, a freeze in benefits which was imposed back in 2016. Such data only serves to louden the calls for this cap to be lifted.

Is it really all bad for pensioners?

While the number of pensioners reduced to poverty makes for alarming reading, there is another side to this story. According to separate ONS data, the median disposable income of retired households soared by £3,200 (or 16 per cent) between 2008 and 2018. In contrast, disposable income for working households grew by just £900, which, in percentage terms, equates to a mere 2.9.

More recent data suggests that this inter-generational income gap between retired and non-retired adults has begun to close, as wages have risen in real terms over the past year. However, it does demonstrate that, in general, pensioners have had a better run of it since the financial crash. This has been attributed to both the triple lock on state pensions, and a steep increase in the number of over 65s with a private pension. 

Yet it does seem to run counter to the growing number of pensioners entering poverty. The obvious conclusion to draw from such a combination is rising inequality, and the ONS actually found that, among over 65s, levels of inequality have increased to levels not seen in nearly two decades. Benefits cuts are likely a key contributor, but so too are the vast numbers of new retirees who have built up private and workplace pensions. And who could possibly begrudge them for tilting the scales through sheer diligence?

Furthermore, regarding the issue of pensioner poverty, many statisticians argue that even the very base metric for determining this - median income - is a poor one, as it is easily skewed.

Final thoughts

It underlines just how difficult the issue of prosperity among pensioners is to unpick, and one needs to look at the whole picture before jumping to any inflammatory conclusions. And certainly, a much broader range of considerations needs to be factored into the equation before dismissing the rise in workers of pensionable age as a negative trend.

That said, in 21st century Britain - the fifth-richest country in the world - there is no justification for vast numbers of elderly people being condemned to a life of poverty, and having to choose between food or heating over the winter months.

Worse still are those who miss out on benefits payments and state pension income that are due to them as a result of a lack of information being made available, or due to complex red tape. Let us be in no doubt that more can be done to help these people in need – and also to prevent more people ending up in a similar situation.


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