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Pensions: Inflation

Answer

The most commonly used measure of pensioner poverty relates to those with incomes below 60% of contemporary median income, after housing costs.An alternative measure of poverty uses the 1998-99 median income held constant in real terms, after housing costs. This is often referred to as absolute poverty. The absolute measure gives an indication of how many pensioners are in poverty compared to 1998-99, after taking account of the effects of price inflation.Estimates of both measures are published in the Households Below Average Income series. The following table the number and percentage of pensioners in the UK in relative and absolute low income, after housing costs for the 'anchor' year of 1998-99 and the three most recent years for which figures are available.The table shows that since 1998-99 the level of absolute poverty has fallen by 21 percentage points (2.1 million pensioners) to a historic low of 8%.

Table: Number and proportion of pensioners in the United Kingdom in low income according to relative and absolute measures, after housing costs
	Relative low income	Absolute low income
	Number (million)	Percentage	Number (million)	Percentage
1998-99	2.9	29	2.9	29
2007-08	2.0	18	1.0	9
2008-09	1.8	16	1.0	9
2009-10	1.8	16	0.9	8
Change 1998-99 to 2009-10	-1.1	-13	-2.1	-21
Change 2008-09 to 2009-10	0.0	0	-0.1	-1

The Government recognise the pressures that those on fixed incomes such as pensioners face when prices increase.We have restored the earnings link for the basic state pension and given a ““triple guarantee”” so that the basic state pension will increase by the highest of the growth in average earnings, price increases (as measured by the consumer prices index) or 2.5%. The restoration of the earnings link and the triple guarantee will benefit both existing and future pensioners by providing a more generous state pension, giving a solid financial foundation from the state, which is essential as part of the pensions system. We also have a long-term commitment to uprating the standard minimum guarantee aspect of pension credit at least in line with earnings.We are protecting key support for older people: free eye tests; free NHS prescription charges; free bus passes; free television licences for those aged 75 and over and winter fuel payments will remain exactly as budgeted for by the previous Government. We have permanently increased the cold weather payment from £8.50 to £25."Notes:""1. These statistics are based on Households Below Average Income (HBAI) data sourced from the Family Resources Survey (FRS). This uses disposable household income, adjusted using modified OECD equivalisation factors for household size and composition, as an income measure as a proxy for standard of living.""2. In the absolute measure of poverty the low income threshold is uprated by the retail prices index excluding housing costs (ONS series CHAZ) from the 1998-99 'anchor' year.""3. Net disposable incomes have been used to answer the question. This includes earnings from employment and self-employment, state support, income from occupational and private pensions, investment income and other sources. Income tax, payments, national insurance contributions, council tax/domestic rates and some other payments are deducted from incomes.""4. Figures have been presented on an after housing cost basis. For after housing costs, housing costs are deducted from income.""5. All estimates are based on survey data and are therefore subject to a degree of uncertainty. Small differences should be treated with caution as these will be affected by sampling error and variability in non-response.""6. The reference period for HBAI figures is the financial year.""7. Numbers of pensioners have been rounded to the nearest 100,000 pensioners.""8. Proportions of pensioners in low-income households have been rounded to the nearest percentage point.""9. Changes between periods are calculated based on unrounded figures and then rounded to the nearest 100,000. Therefore they may differ from the difference between the rounded figures."

Secondary information

Type

Written question

Reference

71214; 532 c917-9W

Session

2010-12

Subjects

Inflation Pensioners Poverty

Contains statistics

Yes

Link

View this Written question on www.publications.parliament.uk