Improved pensions 'will not cut poverty'

from The Telegraph

By Toby Helm, Chief Political Correspondent

Gordon Brown's plans for more generous state pensions will not cut the number of pensioners living in poverty, a leading think-tank claims.

The Institute for Fiscal Studies (IFS) says that without further "substantive reforms" of the tax and benefits system, pensioner poverty will stop falling from its current level of 2.2 million and remain stable for at least a decade.

Cutting the number of pensioners living in poverty - defined as those existing on 60 per cent or less of average income - is one of Mr Brown's key policy objectives. At present around 20 per cent of all over-65s are defined as living in poverty.

The gloomy predictions about the extent of the crisis were issued by the IFS yesterday despite a package of reforms announced last year by ministers, including plans to restore the link between state pensions and earnings and a reduction in the number of years needed to build up a full basic state pension.

The IFS argues that these will merely hold relative pensioner poverty stable and that to make further progress, ministers will have to spend billions more.

One option, its says, would be to make the basic pension universal - so it is based on residence or citizenship rather than the amount of National Insurance contributions an individual pays. This would lift 500,000 out of poverty but at a cost of £7 billion a year.

Another option would be to raise the basic state pension to the level of the pension credit guarantee - a move that would cut pensioner poverty by around 600,000 but cost £8.3 billion a year.

If these two reforms were introduced together, the rate of pensioner poverty would be halved - but at a cost of £20 billion.

James Browne, one of the report's authors, said: "Recent falls in pensioner poverty have been due to substantial increases in the generosity of means-tested benefits, higher private pension income among new retirees, and relatively slow growth in median income across the population as a whole.

"Over the next decade pensioners' living standards should continue to increase, but not sufficiently for the proportion of pensioners in relative poverty to fall.

"If the Government wishes to see pensioner poverty continue to fall, it will have to find more money for pensioners.''

Researchers also found that pensioner poverty could be reduced by 500,000 if all pensioners took up means-tested benefits on offer to them, such as council tax benefit, pension credit and housing benefit. Progress could be made if these were paid automatically rather than after a claims process many find daunting.

Anna Pearson, policy manager for Help the Aged, said the report was a crushing blow for pensioners.

"The Government has all the information it needs to work out whether a person is entitled to benefits.

"Older people would not have to prove their income or make claims through an incredibly complex process with lots of forms. This would dramatically change the lives of half a million pensioners overnight.''