- The rise, from 0.9% of the elderly population to around 5%, is attributable to Britain’s state pension system and its “low basic payments and means-tested supplements”, says the author of the report, Pension Reforms and Old Age Inequalities in Europe.
Professor Bernhard Ebbinghaus, of the University of Oxford, will tell a European Sociological Association conference this week that the UK is one of five countries out of 16 that he has studied where there has been an increase in people aged 65 and over who are living in “severe poverty”, which is defined as having an income of 40% or less of the median average.
“The United Kingdom is a good example of the Beveridge-lite systems that have historically failed to combat old-age poverty,” Ebbinghaus said. “These have rather ungenerous basic pensions with means-tested supplements, and this reproduces relatively high severe poverty rates among the elderly.
British basic pensions are particularly low, 16% of average earnings, and require a long contribution period. Income-tested or means-tested targeted benefits are needed to supplement basic pensions and to lift them out of severe poverty – every sixth British pensioner receives such additional benefits.”
Using data from the Luxembourg Income Study, which spans several decades, Ebbinghaus found that:
• In the mid-1980s about 1% of those aged 65 and over in the UK were living in severe poverty, putting it equal-lowest in poverty rates of 16 western European countries. In France it was 12% and in Germany 6%.
• By 2008, the proportion had risen to 6%, making the UK fourth-equal highest. Only Switzerland, Ireland and Spain were higher.
• Over the following eight years, the proportion dipped slightly but remained at just under 5%.
Ebbinghaus said the UK compared unfavorably with many other countries: “The lowest poverty rates among older people are found in the relatively generous Dutch basic pensions and Nordic welfare states, while the UK, but also Ireland and Switzerland, with basic old-age security, had the highest poverty rates.”
Even when private pensions were taken into account, the UK continued to fare poorly, Ebbinghaus said: “The public-private mix puts many elderly at risk as they lack sufficient supplementary earnings-related pensions.”
He contrasted the UK system, with its flat-rate basic pension, with the “Bismarckian” system used in Germany and several other European countries, where mandatory pension contributions are based on earnings. “A comparative analysis of poverty rates in old age reveals that Beveridge basic security is not always capable of effectively reducing poverty despite the explicit purpose of doing so, while some contributory Bismarckian systems are better suited to reducing poverty, despite focusing on status maintenance,” he said.
Source: The Guardian