The review aims to ensure that workers have enough money in retirement and could include some of the biggest pension reforms in decades.
A new report from the Commons Work and Pensions Committee warns of long-term trends threatening pension adequacy and calls for a national strategy. It includes research from Loughborough's Centre for Research in Social Policy (CRSP), which outlines the Minimum Income Standard (MIS) needed for a dignified retirement.
Here, Professor Matt Padley, Co-Director of CRSP, shares his research expertise and insights on the realities some are facing for retirement and what needs to happen to create a system that will have long-lasting impact and ensure everyone enjoys a dignified standard of living in the later stages of life.
The impact of pensioner poverty
Professor Padley explains that poverty strips people of choice and dignity, isolating them and damaging mental and physical health. Inadequate retirement incomes also strain public services like the NHS and social care.
“There is no single experience of living in poverty, but we know that poverty robs people of choice and limits the opportunities people have to actively take part in society and feel included. It isolates individuals and households and can have really damaging impacts on mental and physical health.
“Poverty can mean having to cut back on meals, not being able to sufficiently your heat homes, not being able to take part in activities, and having the constant worry about not having any kind of buffer if something goes wrong. No one in the UK should be living like this.
“Lack of adequate income in retirement also has consequences and costs beyond individuals, particularly in terms of the impact on the NHS and social care systems.”
Why are so many living in poverty?
The report highlighted that an estimated 700,000 households are still missing out on pension credits. Explaining why this may be the case, Professor Padley says:
“Lack of awareness and the complexity of the system both feed into the lower numbers of take-up, but there is also a stigma around claiming benefits, and embarrassment at ending up in a position to need additional support. We need to get back to seeing benefits as the State fulfilling its role in providing a safety net to support those who need it, rather than as ‘handouts’ for those who don’t deserve it.”
Why a Minimum Income Standard matters
MIS research defines what’s needed for a socially acceptable living standard, including food, housing, and social participation. It has shown that, alarmingly, the number of pensioners living below this standard rose from 1.5 million in 2008/09 to 2.8 million in 2022/23. This means that almost a quarter of pensioners were living in households lacking the income they need to meet their material needs and to participate in society.
Professor Padley explains that increasing income alone isn't enough — reducing essential living costs is equally vital.
“Tackling the costs that make up a large part of what people need for a dignified standard of living is critical. For example, making sure that all pensioners are able to access affordable and appropriate housing. Reducing the pressure on retirement incomes from these sorts of costs is one of the steps that will move us towards reaching a dignified living standard for all.”
Achieving pension adequacy – a broad task
To achieve an adequate level of income during retirement for all, Professor Padley explains that there are three key questions that need to shape thinking: adequate for what, when and whom?
“We need to consider what is it that we want retirement to look like for people? MIS can provide a reasonable starting point for this discussion and act as a guiding principle.
“Retirement is a phase of life, rather than being a discrete point, and it is shaped by what happens before this phase. If someone during their working life doesn’t have the income they need for a dignified, minimum standard of living, it doesn’t make any sense to think that they would be able to pay much into pension savings. Ensuring that working-age people have what they need would likely have positive knock-on benefits for adequacy of income in retirement.
“We also need to consider that needs change across retirement – what is adequate in the first few years may look quite different to what is needed in the last few years of life.”
A decision needs to be made
The report released today recommends that a guiding principle for dignified living needs to be agreed, rather than a fixed target. Professor Padley explains why this approach would provide the flexibility needed to deliver a system that works for all.
“For far too long, we have not been clear about what it is that we want our social security system to do. We need to decide and agree what the state pension is for before we make any substantial changes, for example, to the triple-lock or auto-enrolment.
“Having a guiding principle – that the state pension should provide the amount needed for a minimum, dignified, socially acceptable standard of living – brings clarity and focus to what can end up being a conversation dictated by what the government can afford, rather than what would be transformative for pensioners. We have to think about how we can meet changing living standards rather than setting a functioning target.
“Policy based on principles is also more easily communicated than policy based on fiscal headroom or OBR forecasts.”
To request further comments or an interview with Professor Matt Padley, please email the PR team or call 01509 222224.
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