Echoing research from the Institute for Fiscal Studies early this week, which claimed 40% of those over retirement age would see a reduction in income of at least a third, the ONS data shows that despite improvements in the relative position of retired households, many are still struggling to make ends meet.
The standard guarantee credit level is set by Parliament to ensure a minimum acceptable level of income for pensioners, and in 2011/12 was £137.35 per week for a single person and £209.70 per week for a couple (two people living together). This is set to rise to £142.70 and £217.90 respectively in 2012/13.
In 2010/11, 45 per cent of single pensioners had total pension income of less than £10,000, while 27 per cent of pensioner couples had less than £15,000 - and income from private pensions accounted for a similar proportion of the average gross income of retired households as the state pension: 41 per cent and 38 per cent respectively. However, pensioners with private pensions were more likely to be in the higher income quintile groups
A staggering 1.1 million - or 35% - of households with single people aged 60 or over were classified as being in 'fuel poverty' in 2010, meaning that maintaining a reasonable temperature in their home cost 10% or more of their budget.
Martin Dodd, pensions expert at the Midlands Investment Agency, commented:
"For pensioners, austerity isn't a fad. It's a way of life, imposed on them by plummeting annuity rates and puny interest rates. These figures show in stark terms the sad truth - that for many people, taking retirement means taking a big cut in income. In 2010/11, more than a quarter of retired couples had to survive on an income of less than £15,000, and 45% of single pensioners had to make do with less than £10,000.
"Those approaching retirement face a classic Hobson's Choice - locking into a meagre annuity rate or working for a few more years in the hope that things will improve. But there's little sign that they will. Annuity rates have been falling for more than a decade, and the Bank of England's QE money-printing programme has sped up that decline. The result is that even those who have saved hard will find that their pension pots won't go as far as they had hoped.
"With consumer confidence so battered, many of those of us in work are saving any spare cash we have "for a rainy day", rather than in a pension. While it is prudent to build up a reserve for emergencies, getting out of the habit of saving in a pension is deeply risky. These figures should be a wake up call to anyone who isn't saving into a pension. For an ever-growing number of pensioners, old age is as grim as it is grey."
Steve Lowe, Director at the specialist annuity provider Just Retirement, said:
“Today’s data reveals that the largest source of income for pensioners is ‘benefit income’. With 1.9 million pensioner households living on state benefit income alone, it is critical that pensions check their entitlements. Our research this year revealed that 1 in 5 were missing out on all of their benefits and 1 in 3 were entitled to more than they were claiming. On average those failing to claim any benefit lost £872 a year, with the biggest loss £8,766.”
