By Tom Philips at November 7, 2022

UK Poverty in Later Life Statistics

There are different definitions and measures of poverty in the UK depending on whether someone is single or in a relationship, whether they have children, and whether they are working.

As this article is focused on UK poverty in later life statistics, we will cover the definition of poverty in later life.

A single person who is still in employment is considered to be on the poverty line if they are earning no more than £141 after housing costs. For a couple, this amount increases to £244.

These figures are the same for pensioners. However, there is no set figure for destitution for pensioners, whereas for the employed, an individual wage of less than £70 and a joint household income of less than £105 classes them as destitute.

There are other ways to measure poverty, as the term is often subjective. We may class someone as destitute if they report not being able to afford the essentials, if they do not have access to any savings, or if they lack particular goods or services (1).

Why Does Poverty in Later Life Occur?

Much like poverty in general, there are many reasons that poverty in later life may occur. Often, it follows a trend of poverty in earlier years, but this is not always the case. Here are some reasons that poverty can affect people in their later years:

1. Self-employment

It is certainly possible to save enough for retirement if you are self-employed. However, you have to be proactive in terms of saving for your pension, otherwise, you could end up not having enough money to cover living costs after you finish working.

People who are self-employed are more vulnerable to having an insufficient pension because they do not work for a company that will ask them to opt into a pension. They may also focus on trying to cover living costs at a young age, forgetting that they will also need to save for retirement.

2. Lack of savings

Again, some people are not proactive when it comes to saving for their future, as they are too focused on the present. That being said, with the cost of living crisis, many people simply cannot afford to put money away into savings as they need the money to pay the bills.

3. No Family Support

The unfortunate reality is that some people have access to funds via their family, and others don’t. This starts early, when some people receive help purchasing a house, and others have to struggle renting for many years.

By the time we reach retirement, this gap may become even more evident, as some people have been gifted money by loved ones or have inherited money, whereas others enter poverty as they have not received any financial aid.

What are the Consequences of Poverty in Later Life?

Below, we list some of the consequences of poverty faced by those in later life:

1. Deterioration of physical health

When you cannot afford to purchase the food you need for a balanced diet, this will inevitably have an effect on your physical health.

Not only will it decrease the energy that people have in their later life, but it will also make them more prone to developing serious conditions such as heart disease and certain types of cancer, which are already more likely to affect people as they age.

2. Deterioration of mental health

As well as affecting the physical health of the elderly, poverty can impact mental health. Many people in poverty feel incredibly lonely as they compare themselves to people in more favourable situations.

It is also more likely for people in later-life poverty to experience anxiety about finances, which can impact their quality of life.

3. Homelessness

When people are living on the poverty line with no pension or savings to fall back on, it is possible that their situation will escalate to the point that they will become homeless. This has obvious negative effects, including poor health, both physically and mentally.

4. Death

Unfortunately, when people in their later life cannot afford to purchase food to sustain them and cannot afford to heat their house to keep them warm, they are at risk of dying. There is help available in the UK to prevent this, yet it still happens.

In the winter of 2019, 8,500 people died due to cold homes, and many of these would have been elderly (2)

Which Areas of the UK Have the Highest Poverty in Later Life Statistics?

If we measure poverty in later life by the amount of pensioners who are dying as a result of poverty, Manchester has the worst statistics as of 2019, with 822 pensioners passing away due to poverty (3).

Next on the list is Tower Hamlets in London, but with a significantly reduced figure of 201 deaths. The rest of the list mostly features areas of London, with the North West being mentioned numerous times, and the East Midlands cited twice.

However, it is not only these areas that are plagued with old-age poverty. The amount of elderly people living in poverty currently is five times what it was in 1986, so this is a problem that affects the whole of the UK.

When we compare the UK to other European countries, the results are alarming. The UK has the highest poverty rates, thought to be a result of low basic payments and means-tested supplements.

Countries such as Norway and The Netherlands boast the lowest poverty in later life statistics thanks to their solid welfare state and pension schemes (4).

Alarming Statistics About Poverty in Later Life

1. 40% of all pensioners spent at least one year in poverty between 2010-2019

When we discuss poverty in later life, we may be inclined to focus on people who have always been low-income and cannot escape their precarious situation.

However, we cannot forget that 40% of pensioners have experienced poverty for a brief period between 2010-2019, so even people who are managing to make ends meet currently may have struggled in recent history (5):

2. 18% of pensioners in the UK live in poverty

The percentage of people currently living in poverty in the UK is an astonishing 18%, which is more than 2 million people (6). This excludes people who are heading towards poverty, and who have experienced poverty in recent years.

3. Female poverty in later life has risen by 14-20% from 2013 to 2022

Elderly women are much more likely than men to fall into poverty. There are various causes of this. One is that women are less likely to qualify for a pension due to employment gaps, which usually occur as a result of childcare responsibilities.

Another cause is simply that women live longer than men on average, so their retirement funds need to stretch over a longer period of time.

4. 30% of elderly black people are at risk of being in poverty in later life

The UK poverty in later life statistics for ethnic minorities are extremely concerning. 30% of elderly black people are at risk of poverty in their later life (7).

This occurs for a variety of reasons, but it can be in part explained by lower then average incomes, fewer private pensions, and a large amount of people in this group claiming means-tested state benefits.

What Measures are in Place For Poverty in Later Life?

Firstly, there are measures in place for anyone in poverty that elderly people are entitled to:

1. The Warm Home Discount Scheme

This scheme, funded by energy suppliers, was implemented in April 2011 as a way of helping low-income families to heat their homes between October to March (8).

You qualify for this scheme if you are claiming certain benefits, so you will have to check your entitlement first. If you are approved, you will receive a discount of £150 off your bills over the winter.

2. NHS Health Cost Help

Some people are entitled to free or discounted healthcare depending on their circumstances. You may be entitled to this if you are claiming certain benefits, you are aged over 60, you have a certain disability/health condition, or you have a war pension (9).

You can even benefit from this scheme retrospectively, as you are able to apply for a refund for any treatment you have paid for.

3. Council Tax Reduction

Many people are eligible for a council tax reduction based on their income and individual circumstances. You can check your eligibility through Citizen’s Advice.

There are also schemes that are specifically designed for older people who are struggling financially:

4. Free Bus Pass

Anyone who is of state pension age in England is eligible for a free bus pass, while in Wales you are entitled to this pass when you turn 60 (10).

In London, the minimum age is also 60, but this only includes transport within London.

5. Housing Benefit

If you have reached state pension age, you may be entitled to housing benefits to help pay your rent or pay the interest on your mortgage (11).

6. Free TV Licence

It is not just housing benefits you are entitled to as a pensioner – you can also get additional benefits such as a free TV licence, provided that you are over 75 years old or you are receiving pension credit (12).

7. Pension Credit

If you’re of state pension age and your income is low, you may be entitled to pension credit to help with housing costs (13).

This also helps you to access some of the benefits we have listed, such as the Warm Home Discount Scheme, Housing Benefit, council tax reduction, a free TV licence, and help with NHS treatment funds.

People who receive pension credit are also entitled to a discount on the Royal Mail redirection service when they move house.

How Can Equity Release Combat the High UK Poverty in Later Life Statistics?

Equity release can be a great way for pensioners to get out of poverty if they approach it in a safe way. Here’s why:

1. Low-income earners are eligible

Poverty is often cyclical, so once people are in a precarious financial situation, they struggle to be approved for loans, and this means they cannot escape their unfortunate situation.

However, the equity release scheme is open to low-income earners as there are generally no income checks carried out by equity release lenders. This means it’s a great opportunity for pensioners to escape poverty.

Even people who cannot afford the fees that come with equity release are able to deduct money from their loan to cover these costs, so everyone truly can afford equity release.

2. Repayments are not required

It may seem like a good idea to take out a traditional loan when you are struggling financially, as it can help you to organise your finances in the short term. However, if you cannot afford to repay the money, you could end up drowning in debt.

With equity release, repayments are not obligatory, so you will never get into irreversible debt. You are expected to stay on the scheme for the rest of your life, which means you can live in your current property forever and make the most of the loan you are offered.

3. You can use your loan to repay existing debts

It is very common for people to use their equity release loan to pay off existing debts. This is a great way to get out of the cycle of debt, as you don’t have to repay the equity loan, so you will be free from repayments all round.

4. You can request a lump sum

If you are in desperate need of a large sum of money, whether it be to pay off debts or for a different reason, you are able to select a lump sum lifetime mortgage which grants you access to the tax-free cash all at once.

This means you will not need to wait more than 8 weeks to receive your money, as this is the average length of time for the equity release process.

5. You can request monthly payments

If you would rather control your finances in a different way and you believe monthly payments would work better for you, most lifetime mortgages allow you to do this.

This works well for pensioners who need extra money to cover their bills each month, or people who don’t trust that they would be able to hold off on spending all of the lump sum.

Can I Use Equity Release to Help Someone Else Out of Later Life Poverty?

Though equity release was intended for people who are cash poor, it is possible for you to release equity as a high earner in order to help someone else who is in a precarious situation.

More and more equity release consumers are gifting their equity release funds to trusted family members who are in need of an income boost.

This is usually younger families with children who need help funding their education or housing, but there is no reason that this cannot be applied to older family members.

Of course, elderly loved ones are likely to be able to take out equity from their own home, so it is less likely that they will need your help. However, if they do not qualify for an equity loan and you do, it could be a great opportunity to help them out of poverty.

Some examples of people who do not qualify for equity release are: people who are under 55 years old, people with existing mortgages, people in leasehold properties, non-homeowners, and people whose property is worth less than £70,000.

If you gifted money to someone in one of these situations, you would not have to worry about inheritance tax, which is why it can be preferable to putting this person in your will and waiting for your funds to be transferred to them when you pass away.

The standard 40% inheritance tax does not usually apply to equity release anyway, as most equity release consumers do not end up possessing an estate worth over £325,000, which is the official threshold.

What’s more, if you gift money to your relatives while you are still alive, this money is not liable for inheritance tax, so your loved one is entitled to all of the money. In specific terms, you have seven years before you pass away for the money to be liable for inheritance tax (14).

Can Equity Release Cause Poverty in Later Life?

The only way that equity release could ever cause poverty in later life is if you spend all of your loan at once, especially if you make an unwise purchase.

However, this happens very rarely as equity release clients are encouraged to meet with a professional adviser before taking out equity, and the adviser will offer important financial advice including suggestions for saving money.

In the vast majority of cases, equity release does not lead to further poverty. This is because the money does not need to be repaid, so although customers are technically in debt, they do not ever have to dip into their funds to repay this while they are still alive.

What’s more, the equity release consumer will stay in their property for the rest of their life. Even if they have sold a share of it through a home reversion, they are still entitled to live there until they die or go into long-term care, so they are not at risk of becoming homeless.

Finally, many equity release customers are sensible with their equity loans, and they make decisions that will improve their finances in the long run. For instance, some people opt for a buy to let lifetime mortgage which allows them to earn a steady income from a rental property in their retirement.

Others pay off their conventional mortgage, which means they only need money to cover their bills, and an equity loan is more than enough to cover this cost.

They could choose to save a portion of their equity funds in case their situation changes. Perhaps the best way to do this is through a drawdown lifetime mortgage, which includes an initial lump sum with a subsequent cash reserve.

What are Some Other Ways to Reduce Poverty in Later Life?

We have stated that equity release is a great scheme for anyone who wants to reduce the likelihood of entering poverty in later life, or anyone who wants to escape poverty currently.

However, we know that the disadvantages of equity release may outweigh the advantages for certain people, so we want to discuss some other schemes that can reduce poverty in later life.

1. Downsizing

If your current property is too expensive for you, your situation is not going to get better, as you will continue to need to pay out a large amount for mortgage/rent and bills.

This is why downsizing is a great option for people whose expenses are too high in relation to their income. If you find a property that meets your needs yet is less costly, it could change your future for the better.

Many pensioners find that their homes are too large for them as their family has moved out, which means they have an unnecessary amount of space. Not only does this mean they are wasting money, but it also means they have to put work into maintaining a large home, which gets harder the older they get.

By downsizing, pensioners can enjoy a more low-maintenance lifestyle (if they select a smaller home), and they can benefit from the extra money they will have that isn’t being spent on the mortgage and bills.

However, anyone who is considering downsizing must keep in mind that the current property market is not easy to navigate, and it may be difficult for them to find the right home for them i.e. a property that is close to family, is the right size for them, and is appropriate for pensioners.

2. Budgeting

This is more of a suggestion for people who are trying to avoid poverty in later life, rather than people who are already in dire straits.

It may seem obvious that you would have more savings if you budgeted well, but it is always important to be reminded that we can cut back our spending in certain areas without drastically reducing our quality of life.

For example, you could consider walking more instead of using your car, given that fuel costs have risen in recent years. You may want to plan your meals ahead of time to avoid purchasing takeaways or going back to the shop on a regular basis, as this tends to mean you end up spending more money on food.

We are aware that many people are already working with a tight budget, so we are not shaming these people into restricting their budget even further. This tip is reserved for people who may not realise how much they are currently spending, and how they could counteract this.

3. Working

Anyone who is still shy of retirement age, or who is not far into retirement, could consider continuing to work for a few more years. This is an obvious way to ensure you are earning a regular income without getting into debt.

If you are employed as opposed to self-employed, you would most likely to contributing to your pension in these ongoing years of work, which would set you up for a more comfortable retirement.

As there are more remote roles available post-pandemic, you wouldn’t necessarily have to pay out for travel as you wouldn’t have to commute to your place of work.

You would of course have to consider the higher cost of bills if you were working from home, but you can claim some of this back when you file your tax return.

4. Traditional Loans

Finally, an option that many people turn to is traditional loans. This works for people who have a reliable income, even if it is on the lower side, as they must trust that they will be able to repay the money they borrow.

Unfortunately, some low-income earners are not eligible for most traditional loans as affordability checks are carried out, so people with a higher wage are more likely to be approved.

This also applies for people who have a poor credit rating, as the loan company cannot trust that they will be able to repay the money.

If you are interested in bridging finance, the traditional loan route will generally be more fitting than taking out equity from your property. This is because you can repay it quickly and return to your normal financial situation.

However, once you release equity, you are supposed to be on the scheme for life, so it is better for people who need access to money on a long-term basis as opposed to the short-term.

Contact Us to Release Equity From Your Home

If you are concerned about entering poverty in your later life, or you are already in a dangerous financial situation as a pensioner, don’t hesitate to contact us to find out how you could combat this using equity release.

Our advisers are trained in explaining the pros and cons of equity release in a clear way, describing the different equity release plans that are available, and helping you to discover which plan would be the best for you and your family.

We also encourage you to consider your future when making the decision to release equity as this prevents you from regretting your choice in years to come.

Some tips for preparing for the future are: speak to your loved ones about your decision, select a flexible plan if you are scared about lifelong commitment, and give yourself time to research the implications of each plan.

If you do decide to go ahead with equity release, you will be able to choose between a lifetime mortgage or a home reversion. Both of these options can help to reduce poverty in your later life, but they are slightly different, so we encourage you to research them to find which one resonates with you.

Some of our readers are passionate about equity release but are unfortunately not eligible. If this is you, please do get in touch as we may be able to find a way for you to qualify for an equity loan.

This is because different lenders have different criteria, and we may be able to find one that approves of your situation.

To benefit from a free consultation with one of our equity release specialists, head to our callback page where you will be asked to fill out some basic information, such as your name and phone number, and we will be in touch as soon as we can.

You can also call us on 0330 058 1579 any day of the week between 8am-8pm and ask us about the free consultation.

Don’t worry about being tied into anything, as we never expect you to agree to equity release after our appointment – it is simply a way for us to explain the scheme in detail and find out whether it is something that could improve your financial situation.