State Pension  

State pension dependency increases

State pension dependency increases

Retired households are being increasingly dependent of the state pension, which is one of the few benefits still increasing every year.

According to data published yesterday (May 30) from the Office for National Statistics, the average retired household received cash benefits worth £12,612 in 2017/18, of which 83 per cent was state pension income.

Five years ago, this figure stood at 77 per cent of the total average of cash benefits, which stood at £11,735.

The basic state pension has been increasing every year according to the triple lock. Introduced in 2010, this ensures annual levels rise in accordance with whichever is highest among the rate of inflation, average earnings, or 2.5 per cent.

On the other hand, many working-age benefits, such as jobseeker’s allowance, child benefit and housing benefit, are held at 2015/16 cash values until 2020, meaning their value is falling in real terms, ONS stated.

In addition, a benefit cap is in place in England, Scotland and Wales, which restricts the amount of certain benefits that most working-age households can receive.

Jon Greer, Quilter’s head of retirement policy, said the triple lock protection "seems incongruous at a time when working age benefits are being frozen, especially when retired households have seen their financial position improve relative to younger generations".

However, he noted the government will face a "difficult challenge" if it wants to make changes to the current policies.

He said: "Many retired households are highly dependent on the state pension as a source of income and curbing growth in state pension benefits is unlikely to be popular with older voters.

"That is why in recent elections the major parties have been reluctant to unwind the triple lock, even though it was only intended as a temporary measure to bring retirement incomes up.

"Over the long-term if it remains in place it will guarantee that retired household benefits will rise faster indefinitely."

The International Monetary Fund has recommended scrapping the triple lock, pointing to the "important savings" the UK government could achieve with it.

Mr Greer added: "The important thing for individuals to recognise is that despite growth in retired household income over the last decade, this cannot last forever.

"Nobody should assume or take for granted that their own retirement is assured. The triple lock will eventually be removed and in any event, it is only designed to provide a base-level of retirement income.

"Only private pension savings will deliver the kind of prosperity in retirement that many of us aspire to."

Overall, the ONS figures showed that before taxes and benefits, the richest one-fifth of people had an average household income of £88,200 in 2017/18.

The ratio of average household income of the richest one-fifth of people compared with the poorest one-fifth (£7,900) was 11.2 in 2017/18, continuing the downward trend from 15.5 in 2007/08.

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