EXPERTS have issued a warning as a rising number of people are facing poverty in retirement.
A major new research paper published today has revealed a sharp increase in poverty amongst pensioners in the last decade.
Retirees who are divorced or who never married were the most likely to be struggling, the research by LCP found.
Two-thirds of single pensioners in poverty are women, reflecting how many are affected by the ‘gender pension gap’.
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This is the difference in income between men’s and women’s pensions, with women often left worse off.
The average British man over 55 holds £156,000 in his pension pot, while the average woman has £81,000.
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Experts say this is because women are often paid less in the careers, are less likely to be promoted to senior leadership positions, and more often take time out of work for childcare.
The LCP research found poverty rates for single pensioners are nearly double that of those in couples.
Poverty amongst couples has been relatively flat since 2012/13, but it’s risen sharply among singletons.
Meanwhile, the total number of single pensioners in England in Wales who are divorced has trebled since 2002.
That’s an increase of over one million to 1.5million in 2024.
Report author and LCP partner Steve Webb 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.”
He urged the Pensions Commission, an independent body set up by the Government, to look at ways to tackle the issue.
These include making it easier for the higher earner in a couple to pay into the pension of their lower earning spouse or partner.
It’s currently possible, but it only gives the higher earner basic rate tax relief – even if they pay a higher rate of tax.
Mr Webb also called for more rules to encourage pension sharing when a long-term couple who were living together breaks up.
At the moment, there is no formal rule for pension sharing in this situation so women in particular are at risk of having very low independent incomes in retirement.
The commission could also consider making annuity purchases ‘joint life’ by default.
This means that unless the individual opted out, the other person would continue to receive the annuity payment if the policy holder died.
Pension annuity is when you buy a steady, guaranteed income for life using your pension pot.
Mr Webb said: “It is vitally important that the Pensions Commission looks in depth at these issues when drawing up its blueprint for the future of pensions.”
