FTAdviser.com

Advertising

A nation can be judged on how it looks after its elderly. If this is the case, and it is a comment I have great empathy with, then I must state here and now that I am currently not proud to be British.

Late last month, that wonderful charity Age Concern produced a damming report to coincide with the five year anniversary of the pension credit. It revealed that six in every 10 low-income pensioners are only just getting by financially or are finding it difficult to cope with money matters.

Worryingly, Age Concern said that two-thirds of pensioners are cutting back on the amount of gas and electricity they are using because of spiralling utility bills, with nearly half planning to cut back on their heating this winter. More than half of the elderly are buying less or poorer quality food. In total, more than 2m pensioners currently live in poverty. And some 3m pensioners are living in so-called fuel poverty.

These are findings/statistics we should all be ashamed of. And with inflation among older households currently running at a frightening 9 per cent, financial life is going to get very much harder for the country’s pensioners. Although the credit crunch is going to reap terrible carnage countrywide, it will be the elderly who will be least able to cope.

So, what can we – that is the government, the financial services industry and individuals – do to ensure the elderly get the comfortable retirement they deserve?

First, in terms of the government, in spite of some excellent work done by Gordon Brown et al in the last 11 years to banish poverty among the households of the elderly, more still needs to be done by those sitting in government and basking in the comfort of an assured gold-plated pension when they retire.

Although the government’s flagship pension credit has gone some way to eradicating poverty among the elderly, it has not gone far enough. The government’s fixation with means-tested benefits means that although pension credit is now five years old, a third of those eligible to receive it are falling to claim their share, either because they are not aware of their entitlement or because they are too proud to be seen ‘sponging’. The result is that 1.8m pensioners are missing out on pension credit worth £2.8bn a year. It is a scandalous state of affairs.

To make matters worse, the government has just restricted the amount of backdated pension credit that pensioners can apply for – together with housing benefit and council tax benefit – from a year to three months.

Although the government justifies this move by saying the savings made will be used to ensure those eligible for pension credit are also checked for their entitlement to both council tax and housing benefit, it is a deplorable move which any civilised society should be thoroughly ashamed of.

Age Concern believes pension credit should be paid automatically. Gordon Lishman, director general of Age Concern, said: “Pension credit has the potential to lift hundreds of thousands of pensioners out of poverty but will remain more flagging than flagship without urgent action to reform the faltering benefits systems. Introducing a system of automatic benefits is the only effective way to reach all those who need help through these difficult times.”

I could not agree more.

In terms of the financial services industry, some banks and building societies – most notably Coventry, Nationwide and Norwich & Peterborough building societies – have gone out of their way to design savings products targeted at the income needs of the elderly. I take my hat off to every single one of these organisations.

I can also not talk about the elderly and financial services without acknow-ledging the good work Saga does in ensuring the retired are not excluded from particular financial products – travel insurance being a case in point.

Yet, there is room for improvement. I find it scandalous that despite repeated warnings from the FSA, some insurers still find it difficult to inform pension policyholders of their right to shop around for a best value annuity at retirement. Maybe it will take a mighty FSA fine to knock the industry into shape – let us wait and see.

Putting the open market option to one side, it is also unacceptable that too many retirement illustrations issued by insurance companies are impersonal and take no account of a customer’s particular circumstances. Currently most illustrations I see are issued on a single life, five-year guarantee basis irrespective of the customer’s marital status. Surely, it is not beyond the brains of insurance company geeks (actuaries) to make these illustrations more personal. I know it’s something that Norwich Union is looking at. If Norwich Union can do it, then surely the likes of Legal & General and Standard Life can also do it.

Equally, few insurers spell out the right of retirees with health issues to purchase an impaired life annuity, thereby providing them with all-important income fillip in retirement. This information should be offered as a matter of course.

Finally, in terms of individuals, it is good to see that organisations such as the FSA are doing their bit to provide financial information to those approaching - or in the middle of - retirement. The FSA’s Moneymadeclear website is a step in the right direction.

But the best work and advice is that being provided day in, day out by Age Concern, Help the Aged and Citizens Advice. Age Concern, alone, helped pensioners last year to receive £100m in benefits they would otherwise have ignored while Citizens Advice assisted tens of thousands of elderly people in resolving money issues.

These organisations deserve our full support. If you still have pride in this credit-impaired country of ours, why not help those who are enabling the elderly to enjoy a more financially secure retirement?

Jeff Prestridge is personal finance editor of Financial Mail On Sunday