Pre-pensioner poverty is on the rise

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When I think of retirement, I think of financial freedom, no debt, access to resources with ease, and doing what I want, when I want.

But there is now increasingly more poverty between the ages of 60 and 65 than at any other stage in adult life. With the cost of living increasing and the rise of the state pension age, older people in the UK are being struck by poverty and financial disadvantage which can in turn prevent them from making the most of later life.
 

Retirement dreams are fading

In an ideal world we go through school, get and education, work a few jobs and then retire comfortably to enjoy all that later life has to offer. However this dream is slowly dwindling, as in the last decade pre-retirement poverty has soared, mainly because the increase in the state pension age for women (and the pension credit age for women and men) has far outpaced improvements in employment and health among 60-65 year olds, even before the pandemic.

Ideally, the state pension should provide an income sufficient to cover basic needs and everyone would have opportunities to build up additional private incomes which would allow for a comfortable retirement. However those who suffer pre-retirement financial hardship have often faced long-term disadvantage, with many at risk of poor health and low life expectancy as a result of life-long experiences. Hardship in the pre-retirement years is likely to both precede and exacerbate disadvantage after pension age, including poor health, low life expectancy, and poverty. Bad outcomes in the years before retirement will frequently harm both financial and health prospects later on.

There is so much that can occur in those years before retirement that can throw those who even have the best financial plans off course. Illness, redundancy, bereavement or even relationship breakdown. These are even harder to bounce back from once people have reached retirement and have little opportunity to increase pension income or savings.
 

Would early access help?

Well there doesn’t seem to be a straightforward approach to this, but simply allowing early access to the state pension, even at a reduced rate could offer a lifeline to those who are financially struggling. There is currently no allowance that is made for those in the poorest health, who are unable work, or caring for a family member to draw from their pension pot sooner. It is not just a matter of social support but providing justice and dignity for those who have experienced a set-back which has put them at a disadvantage in later life.

We’re working with the Fabians Society to gather evidence and develop a strategy to address today's worryingly high levels of pre-retirement poverty. We will be doing this by explaining the causes and characteristics of pre-retirement poverty; and researching, developing and promoting a strategy to address it.

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