Are you safe from ‘pensioner poverty'?
A NEW report on incomes and poverty was published last Tuesday by the Joseph Rowntree Foundation, a well-respected think tank that examines social issues in the UK.
What made this so relevant to us is that this report focuses on Northern Ireland, and has found that, not only are one in three working age adults here unemployed, but we are the only UK region that has failed to make progress on poverty in the last decade.
And the problem is getting worse, not better: we are increasingly lagging behind England, Scotland and Wales.
The statistic that most leaped out at me was the one that looked specifically at pensioners. It found that 40,000 of our pensioners in Northern Ireland are officially below the poverty line.
The official EU definition of poverty, as used in the Rowntree report, is living with a disposable income less than 60 per cent of the national average wage. The latest figures (for 2017) show the UK average wage for full-time workers to be £27,600, which implies that the poverty line lies at a household income of £16,560.
Here is the EU definition of disposable income: “A household's disposable income is the money available for spending after Income Tax, National Insurance and Council Tax are subtracted. It consists of wages and salaries from employment and self-employment, investment income, private and state pensions and other benefits.”
We have consistently highlighted the financial challenges facing women in Northern Ireland, as research after report shows us that women tend to put less away for their old age, when compared to men.
The reasons – just to recap them again – are linked to career breaks in order to bring up a family (also known as ‘the motherhood penalty'), the gender pay gap where women tend to earn less than men in a similar job, and the greater likelihood that if they do return to the workforce after a parenting break they are more likely to come into part-time work. Just last week, Aviva's Dublin office told us that women down south are more likely to have lower pay, because they account for 70 per cent of part-time workers.
Well, this brings us to another natty EU definition – that of ‘persistent poverty'. This is where you have had relative low income this year and in three out of the past four years. This affects 4.6m people across the UK, which is 7.3 per cent of the population.
Within that, separate research by the Office for National Statistics (ONS) shows that this affects women in a disproportionate way: 8.2 per cent of women in the UK are ‘persistently poor' compared to 6.2 per cent of men – and it has been the same every single year since proper data became available in 2008. It's a gap that is getting wider – the disparity last year was higher than ever before.
One part of the ONS data comes close to stating the obvious. You are much more likely to ‘express high levels of anxiety' if you are persistently poor: over a third of poor people (35.8 per cent) declared themselves as beset by anxiety, compared to a fifth (21.6 per cent) of the general population.
This difficult situation for pension savers here is just part of a bigger picture: in Northern Ireland there are 370,000 people living in poverty, that's one in five of us and includes 110,000 children, 220,000 working age adults in addition to our 40,000 pensioners.
To state the obvious again: financial planning has never been more crucial than it is today. It is more than advisable to sit down with a financial expert, and put measures in place today that could help you avoid ‘pensioner poverty' in the future.
:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005 . Further information is available on the Facebook page 'Kennedy Independent Financial Advice Ltd'.