A long-term decline in pensioner poverty – cited as a policy success by many politicians – ended in 2012-13, with rates rising steadily since then as outcomes for single retirees have worsened, according to new analysis from LCP.
The consultancy said the overall pensioner poverty rate, measured on a consistent basis, rose from 15.7% in 2012-13 to 18.6% in 2023-24. Poverty among pensioner couples has remained relatively flat over the period, but rates have climbed sharply among single pensioners, particularly those who are divorced or have never married.
More recent corrected figures from the Department for Work and Pensions, which are not yet available as a long-term series, put the poverty rate among single pensioners at 19.8% in 2024-25, compared with 11.2% for pensioner couples.
LCP said the changing composition of the retired population was a key factor. The number of divorced people aged 65 and over in England and Wales has trebled since 2002, increasing by more than a million to around 1.5 million in 2024. The number classified as single and never married has also begun to rise and now stands at around 800,000.
“We need to look at social changes such as the growth in cohabitation and understand what these mean for later life finances. It is vitally important that the Pensions Commission looks in depth at these issues when drawing up its blueprint for the future of pensions.”
Two-thirds of single pensioners in poverty are women. LCP said inadequate pension sharing following the end of relationships and the continuing gender pension gap were among the factors leaving women particularly exposed.
The report also highlighted the growth of cohabitation. Unlike divorce, there is currently no formal mechanism for pension sharing when an unmarried relationship ends, potentially leaving an under-pensioned partner financially vulnerable.
Steve Webb, partner at LCP and author of the report, said: “Some of the discussion of the position of pensioners seems to imply that pensioner poverty is largely solved. But, since 2012-13, pensioner poverty has been rising steadily, predominantly amongst single pensioners.”
Policy options for the Pensions Commission
LCP proposed several policy changes for the government’s Pensions Commission, including making it more attractive for higher earners to contribute to a lower-earning partner’s pension.
Currently, contributions into the lower earner’s pension attract basic-rate relief, even where the person funding them pays higher-rate tax. This can make it more tax-efficient for the higher earner to contribute to their own pension instead. LCP suggested allowing the lower earner to receive higher-rate relief where the contribution came from a higher-rate taxpayer.
The consultancy also called for stronger pension-sharing rights when long-term cohabiting relationships end and for the government to examine whether streamlined no-fault divorce has reduced pension sharing.
It also proposed making joint-life annuities the default where annuities form part of workplace pension retirement solutions, meaning payments would continue to a surviving spouse or partner unless the member opted out.
Webb said: “It is vitally important that the Pensions Commission looks in depth at these issues when drawing up its blueprint for the future of pensions.”
