Pensioner poverty has been rising steadily for the last decade, despite a period of substantial increases in the state pension, according to research.
Poverty in older people is still far lower than it was in the 1990s, but a continued drop has reversed in recent years, according to a report by LCP.
The report found that the rise in poverty has been driven almost entirely by people who are single.
Official figures show pensioner poverty rose from 15.7 per cent in 2012/13 to 18.6 per cent in 2023/24, having reached its lowest point in 2013/14.
The work, authored by former pensions minister Sir Steve Webb, highlights particularly sharp increases in poverty amongst divorced and never-married pensioners.
With two thirds of single pensioners in poverty being women, experts say the findings expose the risks of relying on a partner’s pension, as well as the financial consequences of divorce and the continuing gender pension gap.
Here, we take a look at what is driving the rise – and what experts think could be done to tackle it.
Single pensioners are bearing the brunt
While poverty among pensioner couples has remained relatively flat since 2012/13, it has risen sharply among single pensioners, with the latest rate nearly double that of pensioner couples. The fastest increase has been among those who have never married, followed by divorced pensioners.
The number of divorced people in retirement has also changed significantly as there are now 1.5 million divorced pensioners in England and Wales, compared with 500,000 in 2002.
The number of single, never-married pensioners has also started to rise and now stands at 800,000, reflecting growing numbers of people who previously cohabited outside marriage.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Splitting up in later life can be financially devastating – especially when one partner has built up a healthy pension pot and the other has little or nothing in their own name.
“It may feel easy to assume you will both be looked after, but if the relationship breaks down, that safety net can disappear.”
Why divorce can leave pensioners exposed
Pensions can be amongst the most valuable assets a couple owns, but they can be complicated to divide during a divorce.
Gary Smith, senior client partner in financial planning at Evelyn Partners, said: “Divorce later in life can make the situation particularly challenging.”
Someone who gives up part of their pension as part of a settlement may have little working life left to rebuild their retirement savings.
Equally, someone who keeps the family home instead of taking a share of their former partner’s pension could find themselves with a valuable property but insufficient income.
Smith said this made it “particularly important that pensions are properly considered as part of a divorce settlement rather than treated as an afterthought”.
The gender pension gap is making the problem worse
The research says women are particularly exposed because they are more likely to have lower independent pension incomes.
Sarah Coles of AJ Bell, said: “Around two thirds of retirees are on the pre-2016 state pension, made up of the basic state pension and SERPS/state second pension entitlements. Women were less likely to have built up the additional entitlements, which would leave them on a lower income.
“Women currently have 48 per cent less in their pension than men, so closing this gap is the key.”
Morrissey also stressed the importance of having pension savings in your own name.
She added: “It may not sound romantic, but having your own pension savings is one of the most important ways to protect your future.”
The issue is particularly relevant where one partner has taken time out of work or worked part-time.
What could be done?
LCP is calling for a series of changes aimed at strengthening people’s independent pension provision.
One proposal would change the current rules so that a higher-earning partner could pay into the pension of a lower-earning spouse or partner, with the lower earner receiving higher-rate tax relief on that contribution.
The report also argues for better pension sharing when long-term cohabiting couples split up. Currently, there is no formal mechanism for pension sharing in these circumstances.
Another proposal is to make joint-life annuities the default. An annuity is a financial product bought with some or all of your pension savings that provides a regular income in retirement. A joint-life annuity continues paying an income to a surviving spouse or partner after the person who bought it dies. Under the proposal, this would be the default option, although people could choose to opt out.
Morrissey said this “could be really useful”, warning that people could otherwise buy a single-life annuity without fully appreciating what would happen to their partner after their death.
Ultimately, however, experts say there is no single fix.
Smith said: “There is no single policy intervention that will solve pensioner poverty.”
Instead, the focus needs to be on ensuring people build adequate pension provision in their own right, rather than retirement security depending too heavily on remaining part of a couple.
Sir Steve said: “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.”
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