16 October 2019

TV licence cut means 1.7 million over 75s face real terms cut in living standards next year

6 min read

 
Steve Webb - Director of Policy

Steve Webb

Director of Policy, Royal London

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Pensions boost has a sting in the tail – Royal London calculations show TV licence cut means 1.7 million over 75s face real terms cut in living standards next year.

Today’s publication of the inflation rate for September means that the pension increase for next April can now be calculated based on the ‘triple lock’ policy.   As average earnings grew by 3.9% in the year to July, and this exceeds both the rate of inflation and the 2.5% floor, this means pensions will rise by 3.9% next April as shown below:

Table 1. Pension rates in 2020/21 based on 3.9% uprating, assuming rounding up to nearest 5p

  2019/20 2020/21 Change
New State Pension £168.60 £175.20 +£6.60
Basic State Pension      
-          Single £129.20 £134.25 +£5.05
-          Married £206.65 £214.75 +£8.10

Note: The figure for married couples under the old state pension assumes that the wife claims a 60% pension based on her husband’s record.

But for pensioners over 75 there is a sting in the tail – next June those not on pension credit will be required to pay for a TV licence rather than receiving it for free.  The current cost of a TV licence is £154.50 per year and will rise again next year.   Royal London has calculated that, taking account of the loss of free TV licences, 1.7 million single pensioners over 75 will face a cut in their real living standards next year.   This is because their pension increase, once the TV licence has been deducted, will be just 1.6% -  lower than today’s rate of inflation.

This is shown in the Table:

Table 2. Single pensioners aged 75 or above – pension increase net of TV Licence increase

  2019/20 2020/21 % increase
Basic state pension £129.20 £134.25 +3.9%
Less TV licence cost NIL -£2.97  
Pension after TV licence £129.20 £131.28 +1.6%

 

As Table 2 shows, once account is taken of the requirement to pay for a TV licence, a single pensioner over 75 only has an extra 1.6% next year – lower than today’s headline inflation figure.  As a result, they will face a real-terms squeeze in their standard of living.

There are roughly 2.5 million single pensioners aged 75 or over.   DWP data suggests around 800,000 pension credit recipients are single people aged 75 or over.   Unless pension credit take-up improves markedly in response to the changes to TV licence funding, it seems likely that around 1.7 million single pensioners over 75 and not in receipt of pension credit will suffer a cut in their living standards next year.

Commenting, Steve Webb, Director of Policy at Royal London said:

“The pension rise will be great news for those not affected by the TV licence changes.  But there is a sting in the tail for around 1.7 million single people over 75 who will experience a squeeze in their standard of living once they have paid over £150 for a TV licence next year.  This makes it all the more important that older pensioners check if they might be entitled to claim pension credit so that the poorest pensioners do not face this squeeze”.

 

 

Notes to editors

  1. Figures on the number of single pensioners over 75 can be found in the ‘pensioner income series’ produced by DWP on an annual basis, with the latest figures up to 2017/18; https://www.gov.uk/government/statistics/pensioners-incomes-series-financial-year-2017-to-2018   Table 1.2 shows there are around 2.5 million single pensioners aged over 75.
  2. Figures on take-up of pension credit can be extracted using the DWP ‘stat Xplore’ tool, which gives the following data as at February 2019.  From this we estimate that there are around 800,000 single pensioners over 75 on pension credit.

 

Notes to editors (cont.)

3. There are some indications that pension credit take-up may have increased since the BBC made its announcement earlier this year.  In its July 2019 ‘Fiscal Risks’ report, the OBR says: “The BBC’s announcement appears already to have had an effect. New pension credit claims rose from 7,600 in the four weeks to 7 June (immediately prior to the announcement) to 9,300 in the four weeks to 4 July”.   If these claims are all successful and if this higher level of claims is sustained this would increase the inflow onto pension credit by around 1,700 per month.   This would however only slightly reduce our estimate of around 1.7 million pensioners not on pension credit losing out.

For further information please contact:

Steve Webb, Director of Policy, Royal London

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £130 billion, 8.8 million policies in force and 4,046 employees. Figures quoted are as at June 2019.