A new research paper reveals a sharp increase in poverty amongst pensioners in the last decade, with particularly rapid increases for retirees who are divorced or who never married.
The paper from LCP finds that two thirds of single pensioners in poverty are women, and advocates a range of policies for the government’s Pensions Commission to consider to address these issues.
Its research found that the total number of single pensioners in England and Wales who are divorced has trebled since 2002 – an increase of over 1 million to 1.5m in 2024. The number who are ‘single, never married’ has also started to rise, now standing at 0.8m.
Pensioner poverty reached its lowest point in 2013/14 but has been rising steadily since then. Figures previously published by DWP show that, on a consistent basis, overall pensioner poverty rose from 15.7% in 2012/13 to 18.6% in 2023/24.
Couple pensioners have always had lower poverty rates than singles, but the gap has grown rapidly in the last ten years. The research shows that the rise in pensioner poverty since 2012/13 has been driven almost entirely by single pensioners.
Poverty rates for single pensioners are far higher than for couples – nearly double the rate in the latest data.
Whereas poverty amongst pensioner couples has been relatively flat since 2012/13, it has risen sharply amongst single pensioners; the fastest rise has been in the ‘single, never-married’ group, but also amongst divorced pensioners.
Given that the majority of single pensioners in poverty are women, LCP says a range of policies designed to improve women’s independent access to income in retirement would help to stem this increase.
Potential policies set out in the report, for consideration by the Pensions Commission, include:
• Making it easier for the higher earner in a couple to pay into the pension of their lower earning spouse or partner. This is currently possible but only attracts basic rate tax relief, even if the higher earner pays higher rate tax. The paper proposes that the lower earner – typically the woman – should be awarded higher rate tax relief in these cases.
• Looking at pension sharing when a longstanding cohabiting relationship breaks up. At present there is no formal mechanism for pension sharing in this situation, leaving women in particular at risk of having very low independent incomes in retirement.
• Reviewing whether the move to streamlined, ‘no-fault’ divorces in 2022 has had an impact on rates of pension sharing on divorce, which can be complex and slow.
• Considering making annuity purchases ‘joint life’ by default, meaning that unless the individual opted out, there would always be an ongoing annuity payment after the policy holder died.
Report author and LCP Partner, Steve Webb, said: “Some of the discussion of the position of pensioners seems to imply that pensioner poverty is largely solved. But, since 2012/13, pensioner poverty has been rising steadily, predominantly amongst single pensioners.
"Issues such as inadequate pension sharing at the end of a relationship and the continuing gender pension gap mean that women in particular are at higher risk of poverty in old age. But there are things we can do about this problem, including encouraging couples to share their pension wealth more easily. We also need to look at social changes such as the growth in cohabitation and understand what these means for later life finances. It is vitally important that the Pensions Commission looks in depth at these issues when drawing up its blueprint for the future of pensions.”
