Half a million pensioners ‘out of poverty’ under new calculation

HALF a million pensions are “out of poverty” overnight under a new calculation that takes savings into account.

A report by the Social Metrics Commission, which has spent more than two years formulating a new measure, suggests that the number of pensioners who live below the poverty line is much smaller than previously thought.

The formula – created by the commission, which is chaired by Baroness Stroud, a former adviser to the Department of Work and Pensions – recommends factoring in the costs of childcare, disability, debt repayments and housing.

It also takes into account cash savings, though not property or pensions that cannot be immediately accessed.

It places a household in poverty if it has less than 55 per cent of the median resources available to a family, averaged over three years. A previous calculation, which was scrapped in 2015, measured poverty levels based on income, but critics argued that it did not examine why people were in poverty and created perverse incentives.

The measure put a household in poverty if it had an income below 60 per cent of the median income in the country, meaning that if average incomes fell, this meant fewer households were technically in poverty, even if their circumstances had not changed.

The commission’s figures show that more than half a million pensioners who were thought to be in poverty are not, while almost 490,000 people in working-age households are in poverty when they were not previously thought to be.

Under the previous calculation, just over two million pensioners living alone or in couples are technically in poverty, while under the new one just under 1.5million are.

The poverty rate among single pensioners was 15 per cent, and for pensioner couples it was 9.7 per cent.

The commission included figures from the Joseph Rowntree Foundation, the Institute for Fiscal Studies, Yougov and the Royal Statistical Society.

The measure is not yet official, but commission members said they hoped it would be adopted by the Government.

A Government spokesman said: “Measuring poverty is complex, and this report offers a new understanding.

“Our figures show pensioner poverty is at a near a record low and pensioner incomes have reached their highest levels since records began.”