100 years after first state pension and 2.5m still live in poverty

Britain's biggest pensioner organisation – the National Pensioners Convention (NPC) – is using the anniversary of introduction of the first ever state pension to call on the government to eradicate today’s growing pensioner poverty.

One hundred years ago today (January 1st), the first 'pensioners' collected their state pension at the post office. It was set at 5 shillings a week and paid to men and women on reaching 70 years of age.

Even though the pension was means-tested, it was clearly a tremendous advance in social policy and the first time that the state had recognised it had a responsibility to look after those in old age.

But today, figures show that after a century of the state pension, pensioner poverty remains:

In the last year (2007/8) the number of pensioners living below the official poverty line of £151 a week (60% of median population income before housing costs) has risen by 300,000 to 2.5m. This is the number of older people living in poverty as in 1997/98.

Between 1997 and 2006, the number of people living in severe poverty – defined as living on less than 40% of median population income – increased by 600,000. The poorest quarter of pensioner households saw their incomes rise by less than 1% last year, well below inflation. The poorest single pensioners saw their real incomes drop by 4%.

About two thirds of those pensioners living in poverty are women. Up to as many as 5m do not qualify for a full state pension because they were unable to pay the full national insurance contributions because of caring for their families or being in low paid employment.

Around 62% of pensioner couples have an annual income of £15,000 or less, and 45% of all single pensioners have an annual income of £10,000 or less.

In a recent EU survey, only pensioners in Latvia, Spain and Cyprus are more likely to fall into poverty than those in the UK. The Institute for Fiscal Studies concludes that the proportion of pensioners below the poverty threshold will remain at its current level for at least the next decade, despite government reforms.

A recent survey by Scottish Widows found that 1 in 3 future pensioners will not have sufficient income to avoid poverty when they retire. Up to 9m workers currently have no other pension provision than that which will be provided by the state when they retire, and even those who are currently in a money-purchase (defined contribution) occupational pension scheme have seen the value of their pension funds fall by an estimated £250bn.

Joe Harris, NPC general secretary said: "We owe the original pension pioneers a great debt of gratitude for securing the very first state pension, but they would be turning in their graves if they knew that after 100 years, 1 in 4 pensioners was still living in poverty. In fact, today's state pension is worth even less in relation to average wages than it was in 1908 and next year’s increase in the state pension will be a measly £4.55 a week, at a time when millions of older people will be faced with the unenviable dilemma of trying to heat their homes or eat properly.”

“For decades, the policy of successive governments has been to rely on means-tested benefits for existing pensioners and good occupational pension schemes for future generations, as a way of avoiding paying a decent state pension. But this approach is unravelling – with means-testing remaining unpopular and ineffective at getting money to the poorest and many decent company pensions being replaced by insecure money-purchase schemes. Billions of pounds have been wiped off private pension funds in recent weeks – and up to 9m workers now face an insecure retirement.”

“Pensioners – both now and in the future – need dignity and security in retirement that only a decent state pension can provide. The government should use the huge surplus in the National Insurance Fund to raise the state pension to at least £151 a week to give everyone a pension that takes them out of poverty. After 100 years it’s about time we ended pensioner poverty for good.”