Updated 28 September 2012
Rate of pensioner poverty technical description
| Short title | Rate of pensioner poverty |
|---|---|
| Technical definition | This indicator measures the percentage of pensioners with incomes below 60% of median income in a particular year adjusted for family size and composition and after deducting housing costs, so we are comparing different household types in a robust way. The preferred measure of low income for pensioners is based on incomes measured after housing costs, as around three quarters of pensioners own their own home. Considering pensioners’ incomes compared to others after deducting housing costs allows for more meaningful comparisons of income between working age people and pensioners, and between pensioners over time. |
| Rationale |
The Government wants all pensioners to have a decent and secure income in retirement. Key strategies include:
Automatic enrolment will be introduced into workplace pensions from 2012 to reinvigorate private pension savings, and it was announced in the Budget 2012 that the Government will reform the State Pensions system to introduce a single tier pension for future pensioners, which will lead to a simpler and fairer system that reduces the need for means testing and supports saving. Using 60% of contemporary equivalised median as a poverty threshold is what has been done historically and internationally. |
| Formula |
Produce an "after housing costs" equivalised income for all individuals, calculate the median and then look at how many pensioners fall below a threshold of 60% of the median. Worked Example: |
| Start date | Data published in the “Households Below Average Income” series first published in 1988, sourced from the Family Resources Survey since 1994/95. |
| Good performance | Generally a statistically significant decrease in the indicator will demonstrate that an improvement has been achieved, but external factors such as wider economic conditions also need to be taken into account. The confidence interval range for the 2010/11 data is 13.5%- 14.9% which results in a 95% confidence interval of +/- 0.7 percentage points. |
| Behavioural impact | Perhaps – there could be an incentive to move those just below the threshold to just above the threshold. This allows maximum progress to be shown with minimum effort. However, if it quite difficult to target efforts so specifically, and other indicators of progress published in the “Households Below Average Income” series would show whether this was what had happened. If, for instance the proportion of pensioners below 60% of median equivalised income fell, while pensioner material deprivation and the proportion of pensioners in households with below 50% of median income rose, this might be evidence of aiming at those just below the poverty line. Current policies do not do this. |
| Comparability | Measuring poverty using a 60% of equivalised median income is widely used internationally as a way of measuring relative poverty. This measure differs from the most commonly used international measures, as it takes incomes after housing costs have been deducted. This however is appropriate in the UK context as most pensioners own their own home. |
| Collection frequency | Annual |
| Time lag | Around one year after the end of the survey period |
| Data source (which data collection it comes from) | Family Resources Survey – with analysis completed by DWP |
| Type of data (Whether it is an official statistic, national statistic, survey, MI ) | National Statistics. Survey data |
| Robustness and data limitations |
Data are National Statistics produced to high professional standards. The quality of National Statistics products is assessed on a regular basis by the independent UK Statistics Authority. In 2010/11, full interviews were completed in around 25,000 households in the UK. Measure does not include care home residents as the sample used for the survey consists of private households only. Relative to administrative records, the FRS is known to under-report benefit receipt, however the FRS is considered to be the best source for looking at benefit and tax credit receipt by characteristics not captured on administrative sources, and for looking at total benefit receipt on a benefit unit or household basis. Confidence intervals can be calculated for the headline statistics. Low income is one amongst a group of poverty measures. There are a variety of other measures of poverty that might be used. The data source, the Family Resources Survey, is sponsored by the Department for Work and Pensions, and has been designed to meet its needs. |
| Collecting organisation | A consortium of the Office for National Statistics and the National Centre for Social Research under contract to DWP. |
| Return format | Unit and format of measurement is: millions and expressed in percentage terms |
| Geographical coverage | Regional – using a three-year average to get a sufficient sample size. |
| How indicator can be broken down | There are a wide range of additional breakdowns available. Any material collected on the Family Resource Survey can be broken down by low income, subject to sample size constraints. |
| Further guidance | Data is a SAS data file. Results are published in report format. |
