“When I’m 65” – poverty’s out of sight – it should not be out of our minds.

The Institute of Fiscal Studies has done some interesting work on poverty amongst people in their mid sixties, with one extraordinary finding.

Jonathan Cribb’ work which suggests that people arriving at the end of their working lives are not managing the transition from work to a reliance on pensions very well.

Cribb’s analysis shows that poor people who are 65 are currently experiencing a sharp increase in absolute income poverty in the final year before they draw their state pension.

This suggests  a common misunderstanding that people retire at 65. When I took out a mortgage in 2014, I was told that I could not borrow beyond 65 by HSBC. When I questioned this, I was told that it was because I couldn’t borrow beyond state pension age, even though my state pension age is 67. Some numbers are hard coded into employment practice, lending practice and seemingly into people’s expectation of stopping work.

That is why Thomas a Kempis’ quote is helpful, society frowns on those in poverty, unless they protest they are forgotten, ignored and even blamed. The absent are in the wrong.

Cribb argues that Increasing the state pension age from 65 to 66 raised around £5bn per year for Treasury. But put pressure on household budgets substantially and pushed up income poverty for 65 year olds.

But – and here the news is brighter – once state pension age is reached, things do get a lot brighter for those with very low incomes

The chart shows how pension credit has gradually lifted those in retirement away from the static level of benefit you get from jobseeker’s allowance (what was called unemployment benefit).

And both pension credit and jobseeker allowance are doors to more benefits from the State. In particular housing benefit.

What Cribb’s work points to is the very passive behavior of those on the lowest incomes.

And this is the point that we need to take on board when thinking about pensions adequacy. A sizeable part of the working population have things done for them and do not proactively generate income for themselves. This is not a failing of society or of the people who simply accept benefits (and sometimes fail even to do that).

Cribb concludes that the overall impact of the changes to state pension in 2016 is positive

The bridging value of auto-enrolled savings

There is an argument that those on low earnings with limited years of work ahead of them, have no business saving for a pension. Many complain about small pots that are less than £5,000. But if you are 65 and out of work, expecting your state pension but having to wait, a small pension pot goes a very long way to solving the immediate problem.

For those who find themselves without work or pension in the months and years leading up to retirement , there may be savings – and likely will be savings.

Even minimal savings through auto-enrolment over the past few years can act as a bridge to the state pension for those whose expectation of retirement are still set at 65.

Where the gap is too far to bridge

But as a sad footnote, we need to remember the WASPI women, many of whom had expectations for retiring at 60. For them the gap years were many times those of the 65 year olds of today.

For all our work on engagement, we need to understand that changes in everything from the minimum normal retirement date for private pensions  to the state pension age itself. will have impacts on the poorest stemming not from engagement but inertia.

And we should also remember that whether it is the WASPI women or the IFS, the people who recognise these problems are the ones who have engaged. The vast majority of those who live in poverty, live in silence. We never hear or see their misery.

Out of sight should not be out of mind. Pension policy should be addressing the gaps that the IFS so helpfully highlights.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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