People living alone most vulnerable to poverty in retirement

People living alone are most at risk of poverty in retirement, according to a new study by the Economic and Social Research Institute (ESRI) think tank.

While women can be seen as vulnerable by some measures, people who are not married or cohabiting in the years running up to retirement are worse off by all measures, the study by Anne Nolan, Keelan Beirne and Barra Roantree finds.

The ESRI study looked at the likely retirement position of people born between 1955 and 1960. It works on the basis that this group will retire at the age of 67 between 2022 and 2027.

That is on the basis of the age that was to apply to State pension eligibility for those years, although that is now on hold pending a review after the rising State pension age emerged as an issue at the last general election.

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The study taps data from the Irish Longitudinal Study on Ageing (Tilda) for information gathered in 2010 on the incomes, work history and wealth holdings of people in this cohort when they would have been between 45 and 50.

The broad study looks at three measures of income in retirement. The narrowest considers only cash income from State and private pension, if any. The second takes a measure of the income that could be delivered from savings and investments, while the third also taps the family of the family home.

This income is examined against six benchmarks – three looking at adequacy of retirement income and three looking at poverty-line income.

In all cases those living alone are most likely to find themselves struggling with poverty in retirement.

The report also finds that how assessing poverty among older people can vary widely with even small changes in the measure used.

Cash income

It also suggests that policymakers need to look beyond simple cash income in determining the financial wellbeing of pensioners. Savings and investments deliver an income which should be considered.

So too does the value of the family home, although the authors concede that whether people should be encouraged to draw on the wealth held in their homes to support their standard of living in retirement is “contentious”.

The report notes that uncertainty over their own future health and potential care costs as well as the desire to leave bequests to children may explain why older people are reluctant to tap savings and investments. However, it suggests that tax policy could be used to change the way older people hoard such assets .

“Currently assets transferred at death are fully exempt from capital gains tax, which incentivises individuals to hold on to these assets,” it says, rather than using them to improve their quality of life.

On a separate note it concludes that for some lower-earning individuals, forcing them to save for retirement comes at a cost of lower living standards during their working life “when needs might be high, particularly in the presence of children”.