Five things you need to know about pensions in Wales

With the budget likely to stir debate about pensions, here are five things you need to know about Wales

Perhaps I’m noticing it more now I am a pensioner myself, but there’s been a lot of debate about pensions ahead of the budget: the cost to the public purse; the unfairness of the triple lock; the boomers enjoying their cruises; or the home-owners who refuse to downsize. On the other side of the coin, pensioners protest at being dragged into paying income tax; the meagreness of UK pensions compared with elsewhere in Europe, and the loss of Winter Fuel Payment.

In anticipation of whatever is in the budget stirring some sort of debate, here are five essential things about pensions in Wales.

1. State pensioners are a big part of the Welsh economy

In May this year there were 655,566 people in Wales receiving a state pension – an injection of £6.6 billion into the Welsh economy. {1]

2, Only 1 in 7 get full new state pension

Most media focus is on the value of the new State Pension (nSP), but only 14% of all pensioners in Wales get it in full. A further 13% of pensioners get new State Pension but not the full amount, while the majority of Wales’s pensioners get the old-style basic pension. This old pension is worth around £100 a week less than the nSP.[2]

3. The state pension does not prevent poverty

The value of both the new or basic state pension, even if received in full, is below the poverty threshold (before housing costs) for all but couples who both get the full amount of nSP. Amongst pensioners who do not receive an occupational or private pension, the UK poverty rate stands at 37%. Amongst pensioners as a whole the poverty rate in Wales is 15% (after housing costs) – lower than the rate amongst children and working age adults but nevertheless 100,000 older people struggling to get by. [3]

4. Pension Credit matters at least as much as the value of state pension

For the large number of pensioners whose pension is below the poverty threshold, Pension Credit it is a lifeline. It tops up pensioner income from £227.10 for single households or £346.60 for couples. It also opens the door to several other benefits such as Winter Fuel Payment.

Thee are two big problems with Pension Credit. The first is that not everyone who needs it gets it. Latest estimates suggest that one in three pensioner households who are eligible miss out – a take-up rate of just 64%.[4] The second is that unfortunately, the triple lock does not apply to Pension Credit, leaving it to the whim of governments and often overlooked.

5. High pension incomes are due to occupational / personal pensions

Those pensioners with higher incomes – and there are plenty of them in Wales as well as the rest of the UK – are well off because of relatively generous occupational or personal pensions, or have investments that are paying well. The way to ensure ‘fairness’ is for higher income pensions to pay their share of tax – not only on their income, but also on investments, savings and property too.

I am thinking of preparing a ‘fact sheet’ on this issue – if it would be of interest please comment on the post.

NOTES
1. Data from Stat-Xplore
2. Answer to Parliamentary Question by Ann Davies MP, 30 October 2024
3. StatsWales
4. DWP Income related benefits estimates of take up