The hardship inflicted on retirees now will surely visit future retirees unless steps are taken to alleviate misery.

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

The UK’s major political parties have declared open season on pensioners. Too many pensioners suffer from poverty and lack of heating and eating. Instead of lifting pensioners out of poverty, political parties are promising more misery and premature death.

Without any consultation or impact assessment statement the Labour government cut the winter fuel payment for pensioners, even for those living below the poverty line. Pensioners are deprived of £100 – £300 a year. The policy will force thousands to make hard choices between eating and heating.

The leader of the Conservative Party said “we are going to look at means-testing” of the triple-lock on the state pension. Under the triple-lock, the state pension increases by the highest of the rate of inflation, average earnings change or 2.5 % every year. Tomorrow’s retirees face an uncertain future.

Despite the triple-lock and pensioner benefits, nearly 2m pensioners out of 12.9m live in poverty. The rate of relative pensioner poverty has risen from 13% in 2011/12 to 16% in 2022/23, equivalent to 300,000 additional pensioners. The state pension is the main or the only source of income for nearly half of all pensioners. Around 4.1m retirees are eligible to receive the full post-2016 state pension (often called the new state pension) of £221.20 a week, or £11,500 a year for 2024/25. For pre-2016 retirees, the state pension is £169.50 per week, or  £8,814 a year.

The amount received is determined by the number of National Insurance contributions. Only 26% of retirees receive the full post-2016 state pension of £11,500. In general, single pensioners with total income less than £218.15 per week (£11,336 a year), and couples with income below £332.95 per week can claim Pension Credit which opens the door to winter fuel payment and other means-tested benefits. Some 77% poor pensioners were receiving neither pension credit nor housing benefit in 2022/23. Despite the rhetoric of equality, women are penalised for child-bearing, rearing, domestic and carer duties, and receive lower state pension than men’s.

The UK devotes a smaller percentage of its GDP to state pension and pensioner benefits than most other advanced economies. In 2023–2024, the government spent £132bn on the state pension, Pension Credit, and winter fuel payment, which came to around 5.1% of GDP. For 2024-25, the UK is expected to spend £137.5bn, or 5.2% of GDP. France spends about 13.5% of GDP on pensioner welfare, and Italy about 16.3%.

The UK state pension, as a proportion of the average earrings, is one of the lowest in the industrialised world. The average (mean) UK state pension is £201.65 per week or around £10,500 a year, compared to average wage of £37,430. It is less than 50% of the minimum wage for a full-time worker. A single pensioner needs annual income of around £23,300, and a couple needs £34,000 for a moderate standard of living.

The pension rates are due to rise by  4.1% from April 2025 but only 26% of pensioners will receive the full benefit of £472 (£11,500 X 4.1%). Most of this has already evaporated in higher rents, energy, water, council tax and other bills. Pensioner poverty is also increased by the failure of income tax personal allowances to keep pace with inflation. Since 2021-22 personal allowances have been frozen at £12,570 a year and pensioners with modest income are caught in the income tax net. In 2024-25, around 8.95m over 65s are liable to pay income tax, compared to 4.53m in 2009/10.

Poverty inflicted on retirees brings misery and premature death. More than 1 million people aged 66 or over have been skipping meals. Around 1 in 10 people over the age of 65 are either malnourished or at risk of malnutrition. Some 7m pensioners are turning down heating or reducing the hours they turn it on to help them cope financially.  Around 2m people aged 65+ have unmet needs for care and support. In 2022, 128,000 people died from fuel poverty, including 110,000 pensioners. A study covering the period 2012-2019 noted 335,000 excess deaths (48,000 a year) in England, Scotland and Wales due to poverty and austerity. Over one-third of the deaths were under the age of 65 years i.e. majority were senior citizens.

People power secures better treatment of pensioners. Faced with public protests, Poland reduced retirement age to 65 years of age for men and to 60 years of age for women. France is to increase the state pension age from 62 to 64 by 2030, which after mass protests may now be reconsidered. In sharp contrast, the UK state pension age is currently set at 66 years and is due to increase to 67 in 2026-2028. Britons have ended up with the worst of all worlds – low state pension and longer working life.

Senior politicians want to means-test the state pension, effectively breaking a contract with the people. Former Conservative leader Ian Duncan Smith advocated hiking the state pension age to 75 years, others call for the age to be hiked to 71. Life expectancy in England is around 79 years for males and 83 years for females. But working life depends on health, which in turn depends on access to good food, housing, healthcare and public services. The average healthy life expectancy in England has fallen to around 61.5 years for men and 61.9 years for women. So, hikes in retirement age will force unhealthy people to work for longer and hasten their death.

There is also a class element. For example, the average life expectancy of people living in Blackpool is 73.1 years for males and 78.9 years for females, compared to 83.4 years for males and 86.5 years for females in affluent Kensington and Chelsea. Any hike in the state pension age means that the poor will make tax and national insurance contributions for a longer period but will not live long enough to collect their pension. Their wealth would be transferred to the rich who tend to live longer.

Decent pensions are not an old v young issue as young people will get old too. The hardship inflicted on retirees now will surely visit future retirees unless steps are taken to alleviate misery. The weight of never-ending austerity and real wage cuts means that future retirees will be even more reliant upon the state pension. Around 28% of over 55-year-olds have no other pension saved and will be completely reliant on the state pension. Around 23% of 18-34-year-olds expect to solely rely on the state pension for their retirement.

Pensions are an issue about social justice, equity and humanity. The state pension must not be lower than the living wage. Anyone paying income tax for 25 years should receive it. Governments can use the £86.4bn surplus in the National Insurance Fund Account to boost pensions and pensioner benefits. Instead the last Conservative government raided the Fund to make National Insurance cuts, which mainly benefitted the rich. It has also been raided to give national insurance holidays to companies operating in Freeports.

A decent state pension would eliminate a plethora of pensioner benefits, which many find confusing and don’t claim. It will reduce administrative costs and stimulate the local economy as pensioners tend to spend on everyday things. Pensioner access to good food, housing and healthcare will also reduce pressure upon the National Health Service (NHS).

Neoliberals are not swayed by call for equity and justice and always ask how we are going to pay. That is a strange question as at the behest of neoliberals, governments have bailed out banks, energy companies and capital markets; funded foreign wars Ukraine, Afghanistan, Syria, Libya and Iraq, showered tax cuts and subsidies on corporations and the rich. It is hard to recall any neoliberal protestations.

Governments can fund decent state pension and enable people to live with dignity. Vast sums can be raised by tackling tax anomalies. For example, by taxing capital gains  at the same rates as wages, around £12bn a year can be raised. More than £5bn can be raised by taxing dividends at the same rates as wage. Another £8bn-£10n can be raised by charging national insurance on capital gains and dividends.  Restricting tax relief on pension contribution to 20% for all will generate £14.5bn a year. Since 2010, HMRC has failed to collect over  £500bn in tax due to fraud, avoidance and evasion. Others estimate this to be around £1,400bn. This does not include taxes lost due to profit shifting to low/no tax jurisdictions by corporations. These sources can be supplemented by wealth tax, financial transaction tax, higher income tax rates for the mega rich, higher corporate tax rates, and elimination of tax perks that benefit only a few and other measures.

Pensioner poverty in the world’s sixth largest economy is a political choice and must be challenged. The young and old must join hands to ensure that everyone can live a fulfilling life.

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