Pensioners’ Incomes: Background information and methodology

Question 1

1.  Introduction

Accepted Answer

This background report accompanies the main pensioners’ incomes report for financial year ending (FYE) 2023.

The purpose of this report is to provide further contextual information to aid understanding of the statistics presented in the main report and data tables. It outlines points to note as well as strengths and limitations of the information presented in each section of the main report, alternative data sources, as well as changes this year.

A detailed description of the pensioners’ income methodology, data processing and quality assurance are presented within the relevant sections in this report. These descriptions are intended to help users in the use and interpretation of the FYE 2023 data.

This document, the statistics release and data tables, along with previous releases, can be found on the collections page.

A. Status of the Statistics

Accredited Official Statistics

National Statistics are accredited official statistics.

These accredited official statistics were independently reviewed by the Office for Statistics Regulation (OSR) in November 2012. The continued accreditation of these statistics as National Statistics was confirmed in September 2022 following a compliance check by the OSR. They comply with the standards of trustworthiness, quality and value in the Code of Practice for Statistics and should be labelled ‘accredited official statistics’. Accredited official statistics are called National Statistics in the Statistics and Registration Service Act 2007.

OSR introduced the term ‘Accredited Official Statistics’ to describe National Statistics in September 2023. This was done following OSR’s review of the National Statistics designation and subsequent designation refresh project, which found the term ‘National Statistics’ was not well understood by users of statistics.

You are welcome to contact us directly with any comments about how we meet these standards. Alternatively, you can contact OSR by emailing regulation@statistics.gov.uk or via the OSR website.

Since this assessment by the OSR in 2012, we have continued to comply with the Code of Practice for Statistics, and have made several improvements including:

adding value, in line with DWP Statistics reporting practices, publications have been made significantly shorter to enable a focus on commentary and analysis that aids interpretation to increase clarity and insight
the timeliness of the publication has been improved so that reports are released within 12 months of the completion of the Family Resources Survey (FRS), made possible by improvements to the suite of codes that are used to conduct analysis
by making our data available on Stat-Xplore and the UK Data Service, our statistics are more accessible and support new analysis for users not included in the publications themselves
the quality of statistics has improved as variants of the CPI have replaced the use of Retail Prices Index (RPI) when adjusting for inflation, in line with guidance from the UK Statistics Authority and National Statistician
introduced an improved methodology for measuring and reporting uncertainty around key Pensioners’ Incomes (PI) estimates
amendments to our reporting of ethnic background to reflect fully that this is self-declared. Representation rates are now calculated from known declarations only and exclude ‘choose not to declare’ and ‘unknown’. Only a minimal number of interviews were affected by this change
added new tables in response to user needs.

Users have been informed in advance of changes to the FRS publication. Please see the DWP Statistical Work Programme and the PI Release Strategy for more details.

It is DWP’s responsibility to maintain compliance with the standards expected of National Statistics. If DWP becomes concerned about whether these statistics are still meeting the appropriate standards, we will discuss any concerns with the OSR. Accredited Official Statistics status can be removed at any point when the highest standards are not maintained and reinstated when standards are restored.

Read further information about Accredited Official Statistics on the UK Statistics Authority website.

DWP considers that all PI statistics in this publication are “Fully Comparable at level A*” of the UK Countries Comparability Scale across countries.

B. Background

Relevance

PI contains estimates of the levels, sources, and distribution of pensioners’ incomes. It also examines the position of single pensioners and pensioner couples, including any dependent children, within the income distribution of the population as a whole. This is different from the Households Below Average Income (HBAI) publication. This is because PI only includes the income of pensioner units and excludes the income of other adults living in the same household.

This is a key source of information that is used to inform government thinking on relevant policies, as well as related programmes and projects. Users include policy and analytical teams within the DWP and the Department of Communities in Northern Ireland. Researchers and analysts outside government use the statistics and data to examine topics such as ageing, distributional impacts of fiscal policies and the income profiles of pensioner groups. Estimates in PI (as well as in HBAI) are based on data from the FRS.

PI also contributes data to the Race Disparity Unit who publish Ethnicity Facts and Figures about State Support. Ethnicity Facts and Figures provides information about the different experiences of people from a variety of ethnic backgrounds. It gathers data collected by government in one place, making it available to the public, specialists, and charities.

Accessibility

We have further reviewed our publication tables and supporting guidance to ensure accessibility to users. For compliance with The Public Sector Bodies (Websites and Mobile Applications) Accessibility Regulations 2018, some formatting in the ODS tables, such as merged cells, has been avoided. For more information, please see the accessibility statement specific to DWP’s statistical releases.

The PI publication and background Information and methodology are released in HTML format. PI data tables are released as ODS tables.

UK-level PI data is available from FYE 1995 to FYE 2023 on the Stat-Xplore online tool, which allows users to create their own PI analysis. The PI information is available at family (pensioner unit) level.

Versions of the PI dataset are publicly available through the UK Data Service.

Clarity

PI statistics contain contact details for further information on the statistics, guidance on using the statistics, data sources, limitations, and other necessary relevant information to enable users of the data to interpret and apply the statistics correctly.

Within the data tables, a guidance page offers further help in interpreting the estimates. To aid interpretation a glossary of key terms can be found at the end of this document. For more detail on the coherence and comparability of the PI themes see Section 1H.

Timeliness and Punctuality

In terms of timeliness, data relating to any given financial year are released at the end of the following financial year (March).

PI is based on FRS and HBAI data. FRS and HBAI FYE 2023 were released at the same time as PI FYE 2023.

In terms of punctuality, data has been released as announced in the release calendar, in March each year since 2017.

Confidentiality, security, and transparency

Data is held securely with access given only to analysts who have completed internal data access and security training and have a business need to access the data.

C. Context of the statistics

Pensioners are an increasingly large and diverse group in the population. There are a number of recent reforms affecting current and future pensioners, including:

equalisation of and increasing State Pension age (SPa)
new State Pension
pension freedoms
private pension reforms including automatic enrolment.

This publication illustrates changes in pensioners’ incomes over time and puts the results in the context of both economic and policy changes.

Pensioner demographics

The Office for National Statistics (ONS) population estimates for mid-2021 found that people aged 65 and overrepresented nearly one in five people.

According to the ONS the UK’s age structure is shifting towards older ages because of declining fertility rates and people living longer. The number of people of pensionable age relative to the size of those expected to be of working age is increasing.

Home ownership continues to be higher for pensioners compared to those of working age. Around three-quarters of pensioners live in homes that are owned outright (compared to roughly one in five of the working-age population), so therefore face minimal housing costs, as explained in the HBAI report.

Considerations when interpreting average pensioner incomes

PI finds that there are differences in average incomes between age groups as well as changes over time. There are several reasons for this which should be noted when interpreting these results:

the ‘age’ effect: older pensioners are less likely to be in work and hence receive a smaller amount from earnings. Furthermore, they are less likely to have a partner who is in work. Any pension(s) they may be in receipt of are related to their earnings, years of scheme membership, and pension contributions (including National Insurance in the case of the State Pension) they made previously in their working lives
the ‘cohort’ effect: the rapid rise in occupational pension coverage in the 1950s and 1960s will have been more beneficial to later cohorts. From the 1980s, coverage of high contribution defined benefit (DB) schemes started to decline with most private sector DB schemes now closed to new joiners. Only 9% of all schemes are open to new entrants. Coverage in private sector workplace pensions only started to increase from 2012 following the introduction of Automatic Enrolment. However, contributions to defined contribution (DC) schemes are currently much lower than previous defined benefit schemes
the length of time since retirement: pensions generally increase by less generous uprating measures after retirement. In addition, most annuities purchased with occupational or personal pensions are level annuities, which do not increase over time. Income in real terms is therefore decreasing for these annuities once inflation is considered
uprating: in FYE 2023 the Basic and New State Pension increased by 3.1% in line with Consumer Prices Index (CPI) inflation in September 2021
changing SPa over time: from 6 April 2010, the SPa has been increasing gradually for females, and since December 2018 has been increasing for both males and females. The FRS data contained in this report was collected throughout FYE 2023, during which the SPa for both males and females remained at 66 years. In this report, people are categorised as being above SPa based upon their reported birth date and the timetable for the legislated increases in SPa
annuities and lump sums: 95% of all individuals receiving a private pension payment do so through a DB or DC Annuity. However, individuals who have just started accessing their private pension are much more likely to be receiving this through a Lump Sum or other DC product (49%)
cost of living and wider support schemes: during FYE 2023 the government announced and implemented additional support to families with several Cost of Living and wider support schemes, depending on peoples’ circumstances. These payments are included as part of the income variables on the Family Resources Survey (FRS) dataset and are therefore also present in the PI data. PI data tables using variables that include the calculation of pensioner unit income reflect the Cost of Living payments that the pensioner unit received. For more information, please see the FRS background information and methodology.

D. Policy changes

State Pension

In October 2020, the State Pension age increased to 66 years for both males and females and has remained at 66 years for FYE 2023. Further increases to bring the State Pension age to 67 years are proposed to be phased in between 2026 and 2028. See the State Pension age timetable for further planned changes.

Pensioner TV licences

From 1 August 2020, anyone who was aged 75 years or over and received Pension Credit was entitled to a free TV licence.

Up-rating

In April 2022:

inflation-linked benefits and tax credits rose by 3.1% in line with the Consumer Prices Index (CPI) in September 2021
the Basic State Pension and New State Pension increased by 3.1% in line with inflation, which since FYE 2013 has ensured that the Basic State Pension (and now ensures that the New State Pension) increases by the highest of the increase in earnings, price inflation (as measured by the CPI) or 2.5%. The increase by CPI inflation of 3.1% applies this time. The Basic State Pension increased from £137.60 per week in 2021 to 2022 to £141.85 per week, a cash increase of £4.25 per week. The New State Pension increased from £179.60 in 2021 to 2022 to £185.15 per week, a cash increase of £5.55 per week
the Standard Minimum Guarantee (SMG) in Pension Credit increased by 3.1%. For those who were single, the Standard Minimum Guarantee in Pension Credit increased from £177.10 per week to £182.60 per week, a cash increase of £5.50 per week. For couples, this increased from £270.30 per week to £278.70 per week, a cash increase of £8.40.

Council Tax

the Department for Levelling Up, Housing and Communities estimated that the average band D tax set by local authorities in England for FYE 2023 represented an increase of 3.5% from FYE 2022 levels. Additionally, the government introduced a £150 non-repayable rebate for households in England in council tax bands A to D, known as the Council Tax Rebate. This was in response to the rising cost of household bills in FYE 2023
in Wales, the average band D council tax for FYE 2023 represents an increase of 2.7% from FYE 2022 levels
the average band D council tax for Scotland for FYE 2023 represented an increase of 3% from FYE 2022 levels
in Northern Ireland, there were increases in rates (poundage) of no more than one per cent in some council areas, but in others the rates (poundage) remained as it was in FYE 2022.

Housing Support for private renters

In April 2020, Local Housing Allowance rates were made more generous, as they increased to the 30th percentile of market rents. These rates remained the same for FYE 2023.

Cost of Living Payments

Households on income-related benefits, including Universal Credit, Pension Credit and Tax Credits, received a payment of up to £650 this year. This was made automatically in two instalments, one in summer and another in the autumn, and is in addition to the £400 discount on energy bills. Eligible households could have received up to 3 different types of payment depending on their circumstances on specific dates or during a particular period. More information on Cost of Living payments can be found here. For more information on the treatment of Cost of Living Payments in the Family Resources Survey (FRS) FYE 2023, please see the FRS background information and methodology.

a Cost of Living Payment for households on a qualifying low-income benefit or tax credits. A payment of £650 was paid in 2 lump sums of £326 and £324 to households already in receipt of the eligible benefits. This payment was made on top of any benefit payments received by the claimants
a Disability Cost of Living Payment for households on a qualifying disability benefit. A lump sum payment of £150 was paid to those already in receipt of the eligible benefits. To be eligible for the payment, households must have received a payment (or later receive a payment) of one of these qualifying benefits before 25 May 2022
a Pensioner Cost of Living Payment for households entitled to a Winter Fuel Payment for winter 2022 to 2023. An extra £150 or £300 was paid with eligible households’ normal payments from November 2022. This is in addition to any other Cost of Living Payment received.

Warm Home Discount

Between October 2022 and March 2023, eligible households began to receive a one-off discount on their energy bill under the Warm Home Discount scheme. The rebate increased from £140 to £150 and was discounted automatically from bills. Households were eligible if they were either in receipt of the Guarantee Credit element of Pension Credit or were on a low income and have high energy costs, or for households in Scotland, met their energy supplier’s criteria for the scheme. The Warm Home Discount scheme was not available in Northern Ireland.

Wales Fuel Support Scheme

Eligible households were able to claim a cash payment from their local authority to help towards paying fuel bills, in addition to the GB-wide Energy Bills Support Scheme. This scheme ran between October 2022 and March 2023.

Energy Bills Support Scheme

From October 2022, all domestic electricity customers in Great Britain began to receive a £400 government Energy Bills Support grant to help with rising energy costs. The £400 was received by customers between October 2022 and March 2023 either as a monthly credit on bills, applied directly to the meter or paid as a voucher. Households in Northern Ireland were not eligible for this scheme, but equivalent support of £600 per household was provided.

E. Source of the statistics

The Family Resources Survey (FRS) is the main underlying data source for PI. It is one of the largest cross-sectional household surveys in the UK. The focus of the FRS is capturing information on household incomes, so it provides more detail on different income sources than other household surveys, making it the foremost source of income data. The FRS also captures contextual information on the household and individual circumstances, such as employment, education level and disability. Overall, it is a comprehensive data source that allows for a range of different analysis.

The PI publication is also based on the Households Below Average Income (HBAI) dataset, which is derived from the FRS. HBAI makes an adjustment for households with very high incomes, as the FRS under-records information about these households. The HBAI quality and methodology information report provides further details on this and other topics.

The FRS is an annual survey based on financial years. Data is available for every year since FYE 1995.

Sample size: From April 2011, the target achieved UK sample size for the FRS was reduced by 5,000 households from 25,000 to 20,000 households a year. A published assessment concluded that this reduced sample still allowed the core outputs from the FRS, such as the individual measure of income in PI, to be produced. It should be noted that due to the coronavirus (COVID-19) pandemic, there was a smaller achieved sample size in FYE 2021 and FYE 2022. In FYE 2023, the achieved sample size was 25,000 (30% larger than pre-COVID levels).

Coverage: Until FYE 2002, the FRS covered Great Britain. Since FYE 2003, Northern Ireland has been included, meaning the whole of the United Kingdom is included in PI. Therefore, caution should be taken when comparing results across these years.

F. Strengths of the statistics

the FRS captures more detail on different income sources compared to other household surveys; this allows PI to analyse and report on the different income sources for pensioners
the FRS provides information on components of income and housing costs which are unavailable in administrative data
the relatively long time series available means that trends can be assessed going back to FYE 1995, allowing an analysis of the effects of policies and events on the incomes of pensioners over time
the range of demographic breakdowns allows comparisons between the incomes of groups of pensioners based on age, gender, ethnicity, and marital status
confidence intervals are calculated for a wide range of estimates using a bootstrapping approach (see ‘Measuring the size of sampling error’ below). These measures of uncertainty indicate whether differences between demographic groups and changes between years are likely to be real differences or caused by sampling error
PI provides information on the income of pensioner units in monetary terms, split by sources of income
PI also includes a range of metrics to support a wide range of different research questions, as found in the methodology section of this document.

G. Limitations of the statistics

FRS data collection for FYE 2023

The composition of the FRS sample for FYE 2021 and FYE 2022 was affected by the move to telephone interviewing in response to the coronavirus (COVID-19) pandemic.

For FYE 2023, fieldwork operations for the FRS returned with face-to-face the preferred method of interviewing with telephone interviewing retained as an alternative.

This year, we have enhanced confidence in data quality due to the return of traditional fieldwork methods and the larger achieved sample size of 25,000 households, some 30% larger than was achieved in FYE 2020, and 50% higher than FYE 2022. The achieved sample compares well with FYE 2020, and representativeness has improved on what was observed during the pandemic.

This publication concentrates on long term changes in pensioners’ incomes, and interpretation of year-on-year changes should be treated with caution, as they are not usually statistically significant. Users should be mindful of the differences in data collection approaches across the period and the effect this has had on sample composition when interpreting changes in estimates over recent years. Additional caution is advised when interpreting changes in the data during and since the pandemic, and when comparing directly with pre-pandemic estimates.

More information can be found in Annex 5 of the HBAI quality and methodology information report and the FRS background information and methodology.

This publication is based on survey data. Therefore, it is subject to potential limitations inherent in all surveys, including:

sampling error: This will vary to a greater or lesser extent depending on the level of disaggregation at which results are presented
non-response error: Systematic bias due to non-response by households selected for interview in the FRS. The response rate for the FRS in the FYE 2023 was 25%. To correct for differential non-response, estimates are weighted using population totals
survey coverage: The FRS covers private households in the UK. Therefore, individuals in nursing or retirement homes, for example, will not be included. This means that figures relating to the most elderly individuals may not be representative of the UK population, as some individuals in this age group will have moved into homes where they can receive more frequent help
survey design: The FRS uses a clustered sample design to produce robust regional estimates. Therefore, the FRS is not suitable for analysis below region level
sample size: Although the FRS has a relatively large sample size for a household survey, small sample sizes may require several years of data to be combined for some analysis.

Furthermore, relative to administrative records, the FRS is known to under-report benefit receipt. However, the FRS is the best source for looking at benefit and tax credit receipt by characteristics not captured on administrative sources, and for looking at total benefit receipt on a benefit unit or household basis. It is often inappropriate to look at benefit receipt on an individual basis because means-tested benefits are paid on behalf of the benefit unit. For further information on the under-reporting of benefit receipt, see the FRS background information and methodology.

H. Coherence and comparability

Coherence

PI uses a harmonised and consistent methodology. Any changes to the methodology are reported and announced in Pensioners’ Incomes statistics.

The PI release strategy highlights the potential release of new statistics within the publication and announces any other developments for future publications.

Comparability

PI uses uprating factors to adjust for inflation, by bringing values from previous years into current price terms for the most recent year of the publication. This means that the years are comparable over time.

DWP considers that all PI statistics in this publication are “Fully Comparable at level A*” of the UK Countries Comparability Scale across countries.

I. Definitions and terminology

The Office for National Statistics (ONS) has published a guide for users of official statistics on earnings and income. This guide compares the main sources of data available and outlines which sources will best meet user needs. This can be found here: A guide to sources of data on income and earnings.

Other useful information on income and earnings:

More information can be found in the glossary, below.

Pensioner Units

PI provides analysis on pensioner benefit units (known as pensioner units), which include:

Age of pensioner units

For analysis of pensioner units by age, pensioner couples are categorised by the age of the head. The head of the pensioner unit is the Household Reference Person (HRP, see below) if they belong to the pensioner unit. In households with multiple pensioner units, if the HRP is not part of the pensioner unit, the head of the pensioner unit is the first person from the pensioner unit named in the interview. In households where there is one person under SPa and one person over SPa, the younger person may be the HRP and therefore the head of a pensioner unit need not be over SPa.

The HRP is the householder with the highest income, regardless of gender.

in a single adult household, the HRP is the sole householder (i.e., the person in whose name the accommodation is owned or rented)
if there are two or more householders, the HRP is the householder with the highest personal income from all sources
if there are two or more householders who have the same income, the HRP is the eldest householder.

Income

PI estimates do not reflect income from other adults and their dependent children in a household. For example, if a pensioner lives with their adult children, the younger adults’ incomes are not included in this analysis. While the benefit income of dependent children is included in estimates, this was only relevant for just over half a per cent of pensioner units in FYE 2023.

Estimates are based on unequivalised income, except when comparing to the overall population distribution in section 7 of the main publication and in tables 4.6 and 4.7 of the table pack. Equivalisation makes an adjustment to income to reflect household size and composition in order to compare income across households as a measure of living standards and is used in the HBAI publication. In most cases in PI, income is shown for single pensioners and pensioner couples separately.

Income measures

Gross income: In PI, gross income is generally separated into six components:

income from benefits, including tax credits. In FYE 2023, Benefit income includes several Cost of Living Payments. In some tables this is further divided into:
- State Pension: Basic and Additional State Pensions, New State Pension, Bereavement Allowance (previously Widow’s Pension), and Widowed Parent’s Allowance
- income-related benefits: Pension Credit, Housing Benefit, Council Tax Reduction, Social Fund Payments, and Universal Credit (for working-age partners of pensioners included within the dataset). In FYE 2023, this includes the low income benefits and tax credits Cost of Living Payment
- disability benefits: Disability Living Allowance, Personal Independence Payments, Armed Forces Compensation Scheme, Attendance Allowance, Industrial Injuries Disablement Benefit, and any remaining Severe Disablement Allowance cases. In FYE 2023, this includes the Disability Cost of Living Payment.

These three benefit types are not exhaustive: there are benefits, such as Winter Fuel Payments and Carers’ Allowance, which do not fit into any of these categories but are included in total benefit income. In FYE 2023, this includes the Pensioner Cost of Living Payment.

income from occupational pensions: employee pensions associated with an employer and workplace
income from personal pensions: personal pensions, annuities bought with lump sums from personal pensions, trade union and friendly society pensions.

Income from private pensions is the sum of income from occupational pensions and personal pensions.

income from investments: including interest from Individual Savings Accounts (ISAs) and other savings accounts, unit trusts, bonds, stocks, and shares
income from earnings: including employee earnings and profit and loss from self-employment, as well as income from dividends. From FYE 2022, income received from director’s dividends is included in the estimates following an addition to the FRS. From FYE 2023 they are only included where directors are classed as employees following a methodological review. The income is treated as income from earnings
other income: benefits from friendly societies, income received for dependent children, maintenance payments and, from August 2020, free TV licences for those aged 75 and over who receive Pension Credit. In FYE 2023, this includes several wider support Cost of Living Payments: the Council Tax Rebate, the Energy Bill Support Scheme, the Northern Ireland Energy Bills Support Scheme, the Warm Home Discount, and Welsh Fuel Support Payment.

More information about the different income sources can be found in the glossary and for further information on the treatment of Cost of Living Payments and wider support schemes in FYE 2023, see the FRS background information and methodology.

Net income Before Housing Costs (BHC) comprises total income from all sources for all members of the pensioner unit. Income is net of:

income tax payments
National Insurance contributions
contributions to pension schemes
local taxes (i.e., council tax or domestic rates)
maintenance and child support payments
student loan repayments, and
parental contributions to students living away from home.

Net income After Housing Costs (AHC) is derived by deducting a measure of housing costs from the above income measure and is also net of:

rent (gross of housing benefits)
water rates, community water charges and council water charges
structural insurance premiums (for owner occupiers)
mortgage interest payments (net of any tax relief), and
ground rent and service charges.

Income from Housing Benefit is included within gross income as an income-related benefit. Capital mortgage repayments are not deducted as a Housing Cost, as this is regarded as an asset being accrued and not a cost.

We use AHC figures throughout the PI publication unless otherwise stated, as this is a better reflection of pensioners’ disposable incomes.

J. Alternative data sources

There are other data sources that can provide information on areas of interest similar to those in the PI publication. These are listed below:

a guide to sources of data on income and earnings produced by the ONS. This guide is for users of official statistics on earnings and income. It compares the main sources of data available and outlines which sources will best meet user needs
visit the income and earnings interactive tool where you can filter by government department and country of interest to find relevant statistics
HBAI presents the number and percentage of pensioners living in low-income households and material deprivation
the FRS publication includes pension participation for working-age individuals. This shows those who are saving for retirement and the type of pension they are saving in (occupational or personal)
Income Dynamics looks at changes in household income including a measure of persistent low income, based on Understanding Society data
the DWP Stat-Xplore Tool is a tool which provides users with access to administrative data, as well as data from FRS, HBAI and PI which allows users to conduct their own analysis. Users can download and analyse statistics on a range of different benefits, programmes, and other administrative information collected and stored by the department
the English Longitudinal Study of Ageing (ELSA) is a biennial longitudinal study of the health, social and economic circumstances of a sample of approximately 7,600 people aged over 50 in England. ELSA started in the early 2000s, with ten waves of data currently published. It provides longitudinal data on pensions, savings, and labour market participation, as well as information on employment, retirement interactions, and transitions over the life courses of respondents as they grow older. ELSA also provides information on health trajectories, disability, and healthy life expectancy
the Wealth and Assets Survey (WAS) is a large-scale longitudinal survey with seven rounds currently published. Round 7 (2018 to 2020) had a sample of around 17,500 private households or 31,800 individuals in GB. It is conducted by the ONS. The WAS dataset holds information about the economic status of households and individuals including their physical and financial assets, debts, and pension provision. WAS data is also used to understand how wealth is distributed and the factors which may affect financial planning, as well as respondents’ attitudes and behaviours towards saving. The Pension Wealth tables in WAS provides estimates of the types of private (non-state) pension wealth, split by a wide range of socio-demographic and economic breakdowns
the Occupational Pension Scheme Survey (OPSS) was an annual survey, conducted by ONS. It covered occupational pension schemes from the public and private sector and samples at the level of the scheme. The OPSS provided the UK’s longest consistent time series for estimates of pension scheme membership, with data from 1953 to 2018, and it provided estimates of the number of schemes, scheme members, and their level of contributions
the Financial Survey of Pension Schemes (FSPS) is a quarterly survey that gathers information about income and expenditure, transactions, assets, and liabilities of pension schemes
the Annual Survey of Hours and Earnings (ASHE) is published by the ONS. It has been in place since 1997 and can be used to provide information on earnings for individuals close to or over SPa. It also collects significant information on employee pension membership and contributions. 2020 and 2021 saw lower response rates and data collection disruption due to the coronavirus (COVID-19) pandemic, so ASHE estimates are subject to more uncertainty compared to previous years. The achieved sample for 2023 was 156,000. A summary dataset of pensioner results is published
the Labour Force Survey (LFS) is a continuous, large scale sample survey conducted by the ONS which provides information on the labour market, including employment, unemployment, and economic activity rates. This source can be used to provide information on individuals close to or over SPa in the labour market
the Benefit expenditure and caseload tables produced by DWP contain historic and forecast benefit expenditure and caseload data. These tables include long-term projections of pensioner benefit expenditure, as well as State Pension expenditure by country of residence
DWP benefit statistics provide a high-level summary of National and Official statistics available through Stat-Xplore on a range of benefits, including the State Pension and Pension Credit. The main statistical release document is published on a six-monthly basis, with some data also released quarterly via Stat-Xplore and data tables
personal incomes statistics as published by His Majesty’s Revenue and Customs (HMRC) shows summary information about individuals who are UK taxpayers, their income, and the income tax to which they are liable. The data comes from the annual Survey of Personal Incomes, which samples administrative data held by HMRC on people who could be liable to UK income tax for the income tax year. This source includes information on income and tax for taxpayers of pension age
explaining income and earnings provides information on income and earnings statistics published by government departments, including DWP. It contains information on gender, occupations, and the number of people living below the National Living wage
changing trends and recent shortages in the labour market looks at workers that have entered or left the workforce and how this has changed in recent years
early insights from the Over 50s Lifestyle Study, GB: Attitudes and reasons behind those aged 50 to 70 years leaving the labour market at some point in 2021, in GB between 8 to 13 February 2022
income estimates for small areas, England and Wales: Estimates of four measures of household income at local levels across England and Wales, based on the FRS
Below Average Resources: developing a new poverty measure: Official statistics in development and a statistical consultation on developing new statistics based on the Social Metrics Commission approach to poverty measurement
Cost of Living Payment 2022 to 2023 management information: Ad-hoc release of management information on the number of Cost of Living Payments processed by the government.

K. Quality Management

Quality Assurance (QA) during development

PI is based on the HBAI and FRS datasets. These datasets undergo substantial checking and verification both internally within DWP, and externally by the Institute for Fiscal Studies (IFS). When producing charts and tables for the publication, all content is independently quality assured by different members of the PI team to ensure methodology is robust. All commentary in the PI report is reviewed by the PI team and analysts from the relevant policy areas within DWP to ensure the information presented is accurate and meets user needs. The data quality assurance process can be seen in the flowchart below:

There is quality across the end-to-end process of the FRS. Questionnaire design, testing the questionnaire, and fieldwork processes such as interviewer briefing are all robust
The FRS requires a high threshold to accept interviews as being complete, before being included in the data process
There are several feedback loops between the FRS, HBAI, IFS, and PI, as shown via the arrows in the flowchart above
IFS provides additional quality assurance on the HBAI dataset
PI also receives input through working with DWP policy analysts who are subject matter experts.

Routine Quality Assurance

Every SAS program has its log checked to ensure no errors or warning messages are flagged when ran.

Where updates to SAS code are required before running, this is highlighted within the program with examples of how this should have been updated.

Checks that code has been updated correctly are part of the quality assurance of each section of the overall process.

Independent assessors

QA is conducted by:

members of the Surveys Branch team
a specifically defined QA group, consisting of people within the Surveys team, and specific analysts from within DWP.

Suitable data sources

the FRS is a well-designed survey whose data is designated as Accredited Official Statistics by the OSR
FRS conducts stages of validation, editing, conversion, imputation, and grossing prior to publication
HBAI, which also uses the FRS dataset, is the UK’s primary source of poverty estimates and is also the main source of household incomes
the PI dataset draws on both the FRS and HBAI datasets to focus on pensioners.

L. Feedback

We welcome feedback

If you have any comments or questions, please contact:

Email: PENSIONERS-INCOMES@DWP.GOV.UK

M. Acknowledgements

Lead Statistician: Joanne Burrage

Publication Lead: Yente Meijers

Publication Team: Owusu Appiah, Sophie Rae, John Bilverstone and Luke Scorer

Question 2

2.  Statistical Presentation

Accepted Answer

Overview dissemination process

Pensioners’ Incomes (PI) includes a main publication, data tables available in ODS format, release strategy and this background information and methodology. PI data is also made available on Stat-Xplore. Versions of the dataset are available from the UK Data Service.

Points to Note about Statistical Concepts and Definitions

Use…	If…
Gross	Interested in how much income pensioners receive before any taxes are applied; Or interested in different sources of income.
Net	Interested in income available for pensioners to spend (excluding the income of other household members), either BHC or AHC.
Mean	Interested in all income available to pensioner units in a particular group; Do not consider the influence of the highest incomes to be a major problem; Or interested in breaking down income by source.
Median	Interested in the income of the ‘typical’ pensioner unit; Do not want the average distorted by a small number of high incomes; Or are looking at distributions of incomes.
Average (mean or median) for all	Interested in all income available to pensioner units; Or want to include those with no income from a particular source.
Average (mean or median) for those in receipt	Interested in the average ‘rate’ at which people receive income from a particular source; Or are interested in an individual source of income.
All pensioner units	Interested in broad trends in cash amounts for pensioners (both in couples and singles) as a whole.
Singles and couples separately	Comparing subgroups that contain different proportions of singles and couples; Or looking at distributions of income.
After housing costs	Interested in the income available for pensioners to spend after their housing costs have been met; Considering changes in this net income over time; Or for comparing pensioners’ incomes with working-age incomes.
Before housing costs	Interested in total net income.

Question 3

3.  Methodology

Accepted Answer

A. Rounding and accuracy

In the tables and publication, the following conventions have been used:

[low]	Negligible (less than 50,000 or 0.5 per cent or 50p)
[x]	Not available due to small sample size (fewer than 50 for averages, fewer than 100 for percentages) or as a result of less than three years of comparable data in three-year average tables.

Figures have been rounded to the nearest pound or one per cent. Population sizes have been rounded to the nearest 0.1 million. Individual figures have been rounded independently, so the sum of component items does not necessarily equal the totals shown.

B. Measuring living standards

Incomes are often used as a measure of the ‘standard of living’ achieved by different groups. However, there are many other factors that can affect living standards, such as wealth, physical health, and expenditure. These factors are not considered in this report. Furthermore, estimates of incomes in PI only consider the income of the pensioner units.

Pensioners’ standards of living may also be affected by the income of other adult members of the household or their dependents. Also, no adjustment (equivalisation) is made for single pensioners compared to couples. Income estimates should therefore only be regarded as broadly indicative of pensioners’ overall living standards.

Material deprivation for pensioners, an additional indicator for measuring living standards, has been included in the HBAI publication since FYE 2010 and is derived from a suite of questions in the FRS. A final score is calculated from the set of questions and compared with a threshold score to determine whether a pensioner is in material deprivation.

For details of the material deprivation indicator, see: Department for Work and Pensions Working Paper Number 54. For the latest results on the percentage of pensioners in low-income households and material deprivation, see the HBAI publication for FYE 2023.

Detailed information on the measuring and production of the FRS dataset can be found in this year’s FRS background information and methodology. This also includes information on the survey design, sampling, collection, and quality assurance processes.

C. Grossing

Grossing-up is the term usually given to the process of applying factors to sample data so that they yield estimates of the overall population. Estimates in the PI publication incorporate the 2011 Census based mid-year population estimates into the grossing regime from FYE 2013 onwards. A consistent back series has been produced from FYE 2003 to FYE 2012.

In addition to the use of 2011 Census data, several minor methodological changes have also been implemented in the FRS dataset. These methodological changes were made on the recommendation of the ONS Methodological Advisory Service during an Initial Review of the FRS weighting scheme. A report of the changes made to the grossing regime is available.

For FYE 2023, the population estimates used to weight the FRS are primarily based on the mid-year estimates rolled forward from the 2011 Census to mid-2019 and subnational population projections (2018-based) for mid-2020 and mid-2021. For England, Wales, and Northern Ireland the projection for mid-2021 was rolled forward to mid-2022 using official estimates of population change. For Scotland, the mid-2022 population estimates are taken from the subnational projections (2018-based). Note: This series of population estimates do not take account of the 2021 and 2022 Censuses across the UK.

The mid-year estimates cover the usual resident population and were adjusted to reflect the population living in private households and covered by the FRS sample. This was achieved by deflating the usually resident population using data from the 2011 Censuses on the proportion of people usually resident, by local authority, age and sex who live in private households.

A software package called CALMAR, provided by the French National Statistics Institute, is used to reconcile control variables at different levels and estimate their joint population. This software makes the final weighted sample distributions match the population distributions through a process known as calibration weighting. It should be noted that if a few cases are associated with very small or very large grossing factors, grossed estimates will have relatively wide confidence intervals.

D. Adjusting for inflation

PI uses uprating factors to adjust for inflation, by bringing values from previous years into current price terms for the most recent year of the publication. As advised in a Statistical Notice published in May 2016, from FYE 2015 PI made a methodological change to use variants of the Consumer Prices Index (CPI) when adjusting for inflation. Prior to FYE 2015, variants of the RPI were used to adjust for inflation. Read more information in the FYE 2015 PI publication’s background information and methodology.

E. Adjustment for individuals with very high incomes

An adjustment is made to sample cases at the top of the income distribution to correct for volatility in the highest incomes captured in the survey. This adjustment uses data from HM Revenue and Customs Survey of Personal Incomes (SPI) to control the numbers and income levels of the ‘very rich’ while retaining the FRS data on the characteristics of the households. For FYE 2023, pensioners in GB are subject to the SPI adjustment if their gross income exceeded £99,500 per year (£79,400 in Northern Ireland). Working-age adults (including the working-age partners of pensioners) are subject to the SPI adjustment if their gross income exceeded £351,500 per year (£181,000 per year in Northern Ireland). For more details on the SPI adjustment see the HBAI quality and methodology information Report.

F. Negative incomes

Negative incomes are not thought to be indicative of standards of living. Pensioner units with negative net income BHC have the gross income components of income, and their net income BHC, set to zero. Net income AHC is set to zero minus housing costs, and so for a small number of cases will be negative. See the PI methodological paper number two for more information on negative incomes.

G. Output standards for ethnic groups

The PI FYE 2023 publication adopted the latest harmonised output standards for ethnic groups for the UK, however, ‘mixed’ and ‘other’ ethnic groups have been merged due to small sample sizes. The latest harmonised standards were published in August 2011 and cover the ethnic group question in England, Wales, Scotland, and Northern Ireland. They also cover harmonised data presentation for ethnic group outputs. The standards were updated in February 2013 detailing how Gypsy, Traveller, and Irish Traveller should be recorded in the outputs, due to differences across the UK.

Reporting of ethnic background was amended in FYE 2021 to reflect fully that this ethnicity is self-declared. Representation rates are now calculated from known declarations only and exclude ‘choose not to declare’ and ‘unknown’. For the FRS and PI this has had a minimal effect on reporting.

For further details please see the Ethnicity harmonised standard.

H. Further information

A collection of methodological papers on PI are available which include papers on negative incomes, personal pension income, and definitions of pensioner units.

Question 4

4.  Reliability of estimates

Accepted Answer

The figures in this publication come from the FRS. Like all surveys, it gathers information from a sample rather than from the whole population. The size of the sample and the way in which the sample is selected is carefully designed to ensure that it is representative of the UK as a whole, whilst bearing in mind practical considerations like time and cost constraints. Survey results are always estimates, not precise figures. This means that they are subject to a level of uncertainty which can affect how changes, especially over the short term, should be interpreted.

A. Estimating and reporting uncertainty

Two different random samples from one population, for example the UK, are unlikely to give exactly the same survey results, which are likely to differ again from the results that would be obtained if the whole population was surveyed. This level of uncertainty around a survey estimate can be calculated and is commonly referred to as sampling error.

In addition to sampling error, the PI estimates can also be affected by other non-sampling errors. Some of these are:

reporting errors: Imperfect recall and respondents choosing to deliberately give incorrect answers are examples of reporting error. If these errors are systematic, they may lead to bias in the survey estimates
under-reporting: The FRS information on benefits relies on the respondent being able to accurately report the amount of benefit they receive. This reliance leads to under-reporting in receipt for many benefits. It is also thought that household surveys underestimate income from both self-employment and investments so these figures should be treated with caution. The under-reporting of income from investments is particularly likely to affect the estimates for pensioners
misreporting: The type of income received is self-reported by survey respondents and can consequently be misreported. For example, some survey respondents may not be able to distinguish between the State Pension and Pension Credit because these benefits can be paid jointly
systematic bias: This arises in the sample if certain groups are less likely to respond to a survey than others. This is corrected to some extent in the FRS by grossing to match subgroups of the population by age, sex, family status, tenure, council tax band, and broad geographic region. Nevertheless, it is difficult to account for all possible bias, so some results may still be affected.

We can calculate the level of uncertainty around a survey estimate by exploring how that estimate would change if we were to draw many survey samples for the same time period, instead of just one. This process is called bootstrapping.

B. Measuring the size of sampling error

Bootstrapping allows us to define a range around the estimate (known as a “confidence interval”) and to state how likely it is that the real value that the survey is trying to measure lies within that range. Confidence intervals are used as a guide to the size of sampling error. These are typically set up so that we can be 95% sure that the true value lies within the range, in which case this range is referred to as a “95% confidence interval”. A wider confidence interval indicates a greater uncertainty around the estimate. Generally, a smaller sample size will lead to estimates that have a wider confidence interval. This is because a smaller sample is less likely than a larger sample to reflect the characteristics of the total population and therefore there will be more uncertainty around the estimate derived from the sample.

Statistical significance: Some changes in estimates between years will be the result of different samples being chosen, whilst other changes will reflect underlying changes in income across the population. Confidence intervals can be used to identify changes in the data that are statistically significant; that is, they are unlikely to have occurred by chance due to a particular sample being chosen. Confidence intervals can give a range around the difference in a result from one year to the next. If the range does not include zero it indicates this change is unlikely to be the result of chance.

Working with uncertain estimates: Some changes between years will be small in relation to sampling variation and other sources of error and may not be statistically significant. This is relevant for particular sub-groups, as these will have smaller sample sizes than the overall survey sample size. For these sub-groups it is important to look at long-term trends.

Question 5

5.  Estimating and interpreting uncertainty in PI

Accepted Answer

A. Calculating uncertainty in PI

Since the FYE 2014 publication, confidence intervals have been calculated using a bootstrapping approach, using the statistical package SAS. This has allowed confidence intervals to be calculated for a wider range of estimates.

Bootstrapping considers the design of the sample. It replicates the sampling design of the survey and takes re-samples with replacement from the dataset, creating 500 new samples of the dataset. Each new sample is different and contains multiple copies of some survey observations and none of some others. Exploring the range of results in these samples allows us to generate confidence intervals around the result obtained in the original sample.

From the FYE 2016 publication and onwards, new bootstrapping methodology has provided an improved measure of uncertainty around key PI estimates by creating resamples of the HBAI dataset by simulating stratified, cluster sampling for GB and stratified sampling for NI. It also creates a unique set of grossing factors for each resample using the HBAI grossing process to gross the GB and NI resamples to the UK population. For a more technical guide to the approach used to generate confidence intervals in this report, please see the statistical notice or the HBAI Quality and Methodology Information Report.

B. Interpreting estimates of uncertainty in PI

Table M1.1 provides confidence intervals for key estimates of pensioners’ incomes in FYE 2023. For example, in FYE 2023, weekly gross income for all pensioner units is estimated to be £642. We can be 95% confident that the true value of gross income per week, if we were to take a census of the population, would lie between £621 and £661.

The table shows that, while there is a degree of uncertainty about the estimates, it does not affect the broad conclusions drawn, such as the relative importance of different types of income, or the fact that single males on average had higher incomes than single females.

When comparing two or more estimates, we must factor in the uncertainty surrounding each of the estimates. Table M1.2 shows the growth in sources of income between FYE 2013 and FYE 2023, and FYE 2022 and FYE 2023.

Statistically significant results (at the 95% confidence level) are marked with an asterisk (*). As can be seen, the confidence intervals around the estimates of various growth rates between FYE 2022 and FYE 2023 often include zero. This means that we cannot be confident that the growth rate is different from zero, and hence the change is not statistically significant.

Over short time periods, it is unlikely that an income measure will change dramatically, so the uncertainty is likely to be large compared with the change itself.

Users are advised to draw conclusions from long term trends rather than year on year changes.

Even some longer-term changes need to be interpreted with care. For income sources where the amount received per week varies greatly between pensioner units, such as investment income, even long-term comparisons may not be statistically significant. For example, income from investments has increased by twenty-one per cent for single pensioners from FYE 2013 to FYE 2023, but this increase is not statistically significant (see Table M1.2). Additional caution is advised when comparing to FYE 2022 in table M1.2 due to the effect of the coronavirus (COVID-19) pandemic on the data and the sample.

For more information about uncertainty around FRS derived estimates see the 2014 uncertainty in FRS based analysis report. There is also the 2017 statistical notice for the change implemented from FYE 2016 data onwards.

Table M1.1: Uncertainty surrounding estimates in PI FYE 2023

Measure	Estimate		95% confidence interval
	£ p/w	Interval width	Relative width	Interval range
All pensioner units
Gross income	642	40	6%	621 to 661
of which
Benefit income	277	10	4%	272 to 282
Occupational pension income	194	18	9%	184 to 202
Personal pension income	22	7	31%	18 to 25
Investment income	48	9	19%	43 to 53
Earnings income	89	34	38%	71 to 105
Other income	12	2	13%	11 to 13

Net income BHC
Mean	536	26	5%	523 to 550
Median	424	24	6%	413 to 437

Net income AHC
Mean	500	28	6%	487 to 514
Median	387	24	6%	375 to 398

Pensioner couples
Median net income BHC	589	41	7%	566 to 607
Median net income AHC	561	39	7%	538 to 577

Single pensioners
Median net income BHC	313	18	6%	303 to 321
Median net income AHC	267	20	8%	256 to 276

Single male pensioners
Median net income BHC	335	33	10%	318 to 351
Median net income AHC	286	42	15%	265 to 307

Single female pensioners
Median net income BHC	305	22	7%	294 to 316
Median net income AHC	259	28	11%	245 to 273

Pensioner units where the head is under 75
Median net income BHC	470	40	9%	451 to 491
Median net income AHC	428	38	9%	408 to 447

Pensioner units where the head is 75 or over
Median net income BHC	387	23	6%	376 to 399
Median net income AHC	356	31	9%	342 to 373

The interval widths are calculated on unrounded numbers and therefore may not match the interval range.

Table M1.2 Growth in average incomes of pensioner units, FYE 2013 to FYE 2023, and FYE 2022 to FYE 2023

Measure	FYE 2013	FYE 2022	FYE 2023	% growth FYE 2013 to FYE 2023	% growth FYE 2022 to FYE 2023	95% confidence interval FYE 2013 to FYE 2023	95% confidence interval FYE 2022 to FYE 2023
All pensioner units
Gross income	616	649	642	4%	-1%	-1% to 9%	-6% to 3%
of which
Benefit income	269	284	277	3%*	-2%	1% to 6%	-5% to 0%
Occupational pension income	168	215	194	16%*	-10%*	5% to 25%	-17% to -2%
Personal pension income	26	20	22	-16%	10%	-43% to 3%	-25% to 37%
Investment income	42	45	48	15%	7%	-3% to 31%	-11% to 22%
Earnings income	107	82	89	-17%	9%	-40% to 2%	-21% to 31%
Other income	4	3	12	187%*	286%*	103% to 249%	114% to 396%

Net income BHC
Mean	512	545	536	5%*	-2%	0% to 9%	-5% to 2%
Median	405	431	424	5%*	2%	1% to 10%	-6% to 3%

Net income AHC
Mean	474	507	500	6%*	-1%	1% to 10%	-6% to 3%
Median	367	386	387	5%	0%	0% to 10%	-4% to 6%

Pensioner couples
Gross income	841	874	876	4%	0%	-4% to 11%	-7% to 6%
of which
Benefit income	302	330	322	7%*	-2%	3% to 10%	-6% to 1%
Occupational pension income	237	310	282	19%*	-9%*	6% to 30%	-21% to 1%
Personal pension income	43	30	32	-26%*	7%	-55% to -7%	-36% to 37%
Investment income	64	65	72	12%	11%	-16% to 33%	-24% to 32%
Earnings income	190	136	156	-18%	15%	-47% to 3%	-24% to 40%
Other income	5	3	13	178%*	308%*	53% to 260%	72% to 438%

Net income BHC
Mean	684	726	720	5%	-1%	-1% to 10%	-7% to 4%
Median	557	595	589	6%	-2%	0% to 10%	-6% to 4%

Net income AHC
Mean	653	694	692	6%	0%	-1% to 11%	-7% to 5%
Median	526	570	561	7%	-1%	0% to 12%	-8% to 4%

Single pensioners
Gross income	402	428	418	4%	-2%	-4% to 11%	-10% to 5%
of which
Benefit income	238	239	234	-1%	-2%	-5% to 2%	-6% to 2%
Occupational pension income	102	122	110	8%	-10%	-8% to 21%	-23% to 2%
Personal pension income	9	10	12	25%	19%	-64% to 70%	-48% to 66%
Investment income	21	25	25	21%	1%	-35% to 58%	-57% to 35%
Earnings income	28	29	25	-11%	-12%	-54% to 17%	-72% to 20%
Other income	4	3	12	196%*	266%	52% to 304%	-96% to 419%

Net income BHC
Mean	349	367	360	3%	-2%	-3% to 9%	-8% to 4%
Median	307	310	313	2%	1%	-3% to 5%	-4% to 5%

Net income AHC
Mean	304	324	317	4%	-2%	-3% to 11%	-9% to 5%
Median	254	265	267	5%	1%	-2% to 11%	-5% to 7%

Results that are statistically significant are denoted with an asterisk (*).
Confidence intervals are calculated on unrounded numbers. Changes are indicated as statistically significant if the confidence interval before rounding does not include zero.
The percentage changes are calculated on unrounded numbers and therefore may not match those calculated for the rounded numbers shown in the table.

Question 6

6.  Households Below Average Income (HBAI) and Pensioners’ Incomes (PI)

Accepted Answer

Two of the tables in the PI table pack (Tables 4.6 and 4.7) provide information on the position of pensioners within the overall income distribution. These tables define pensioners as adults in families where at least one member is over SPa, consistent with the rest of the PI table pack. This is different to the definition used in HBAI which defines pensioners as those over SPa.

Results from HBAI should not be directly compared to those from PI. The main differences between HBAI and PI methods of analysis are:

Income components: The PI results include analysis of the components of pensioner unit income (benefit income, occupational pension income, etc.). HBAI, with its broader span of interests, does not present detailed analysis of this sort.

Household or pensioner unit: PI is generally concerned with cash incomes directly received by pensioners. It measures the income of pensioner units only (plus income for any dependent children within the pensioner unit), ignoring income received by any other members of the household. HBAI attempts to measure material living standards, so it includes all the income for the household in which the pensioner lives; the underlying HBAI assumption being that the total household income is shared amongst all household members.

Equivalisation: To allow comparison of living standards of different households, the HBAI ‘equivalises’ household income; that is, adjusts it to take account of household size and composition. One of the main functions of PI is to provide information on the income of pensioner units in monetary terms, split by sources of income. This can only be done using unequivalised income. Equivalisation is not necessary for most results, which are presented separately for pensioner couples and single pensioners. To avoid unnecessary complexity, the main PI results are presented in monetary terms, at constant FYE 2023 prices, rather than equivalised income at FYE 2023 prices. PI does however use equivalised income to analyse pensioners’ position in the overall population income distribution.

Equivalisation Scales: HBAI historically used the McClements equivalisation scale. Following user consultation, the FYE 2006 edition of HBAI and subsequent HBAI publications have used Modified OECD equivalisation scales. The same change has been made to the relevant data in PI since the FYE 2006 edition of PI. Information on the effect of the change can be found in Appendix B of the FYE 2006 edition of PI.

Question 7

7.  Glossary

Accepted Answer

This glossary gives a brief explanation for each of the key terms used in PI. Further details on these definitions, including full derivations of variables, are available on request from the DWP PI Team at pensioners-incomes@dwp.gov.uk.

A glossary of income and earnings terms produced by the ONS is also available.

Adult

All individuals who are aged 16 and over are classified as an adult, unless the individual is defined as a dependent child (see Child). All adults in the household are interviewed as part of the FRS.

Age

Respondent’s age at last birthday (at the time of the interview).

Automatic enrolment

Automatic enrolment requires all employers to enrol their eligible workers into a workplace pension scheme if they are not already in one. The staged timetable began in October 2012 for larger firms and completed for all employers in 2018. To preserve individual responsibility for the decision to save, workers can opt out of the scheme. To be eligible for automatic enrolment, the jobholder must be at least 22 years old, under SPa, earn above the earnings trigger for automatic enrolment, and work or usually work in the UK. For more information see automatic enrolment.

Benefit unit or family

A benefit unit may consist of a single adult, or a married or cohabiting couple, plus any dependent children. Same-sex partners have been included in the same benefit unit since January 2006. Where a total for a benefit unit is presented (such as total benefit unit income) this includes income from adults plus any income from dependent children. There are various types of benefit unit:

pensioner couple: Benefit units where either adult in the couple is over SPa
pensioner couple, married or civil partnered: Benefit units headed by a couple in which at least one partner is over SPa and the couple are either married or in a civil partnership
pensioner couple, cohabiting: Benefit units headed by a couple in which at least one partner is over SPa and the couple are neither married nor in a civil partnership
single male pensioner: Benefit units headed by a single male adult over SPa
single female pensioner: Benefit units headed by a single female adult over SPa

It should be noted that ‘pensioner unit’ is used throughout the report as a description of groups of individuals regardless of whether they are in receipt of any state support.

Benefits

Financial support from the government. Most of these benefits are administered by DWP. The major exceptions are Housing Benefit and Council Tax Reduction, which are administered by local authorities. Child Benefit is administered by HMRC, who also administer Tax Credits. These are not treated as benefits, but both Tax Credits and benefits are included in the term State Support. Tax Credits will ultimately be replaced by Universal Credit.

Benefits are often divided into income-related benefits and non-income-related benefits. In assessing entitlement to the former, the claimant’s income and savings will be checked against the rules of the benefit. In contrast, eligibility for non-income-related benefits is instead dependent on the claimant’s circumstances (a recent bereavement, for example), rather than their income and savings. A list of the main state benefits divided into these two categories is below.

Disability-related benefits is the term used to describe all benefits paid on grounds of disability. These are: Disability Living Allowance, Personal Independence Payments, Armed Forces Compensation Scheme, Attendance Allowance, Industrial Injuries Disablement Benefit, and any remaining Severe Disablement Allowance cases. Before FYE 2009, Incapacity Benefit was also in this group. Numbers on Incapacity Benefit and Severe Disablement Allowance benefits have decreased over time, as both were replaced by Employment and Support Allowance from October 2008.

Income-related benefits (UK)	Non-income-related benefits (UK)
Council Tax Reduction	Attendance Allowance
Employment and Support Allowance (income-related element)	Carer’s Allowance
Housing Benefit	Child Benefit
Income Support	Disability Living Allowance (both mobility and care components)
Pension Credit	Employment and Support Allowance (contributory element)
Universal Credit	Personal Independence Payment (Daily Living and Mobility components)
	State Pension

Child

A dependent child is defined as an individual aged under 16. A person is also defined as a child if they are 16 to 19 years old and they are all of the below:

not married nor in a civil partnership nor living with a partner
living with parents or a responsible adult
in full-time non-advanced education or in unwaged government training.

Confidence interval

A measure of sampling error. A confidence interval is a range around an estimate which states how likely it is that the real value that the survey is trying to measure lies within that range. A wider confidence interval indicates a greater uncertainty around the estimate. Generally, a smaller sample size will lead to estimates that have a wider confidence interval than estimates from larger sample sizes. This is because a smaller sample is less likely than a larger sample to reflect the characteristics of the total population and therefore there will be more uncertainty around the estimate derived from the sample. Note that a confidence interval ignores any systematic errors which may be present in the survey and analysis processes.

Council tax

The tax is based on which, of a set of bands, a property’s value falls into. Its headline rate is based on two adults per household. Read more information on Council Tax.

Equivalisation

Income measures used in HBAI consider variations in the size and composition of the households in which people live. This process is called equivalisation. Equivalisation reflects the fact that a family of several people needs a higher income than a single individual in order for them to enjoy a comparable standard of living. Equivalence scales conventionally take a couple with no children as the reference point. The process then relatively increases the income of single person households (since their incomes are divided by a value less than one) and relatively reduces the incomes of households with three or more persons, which have an equivalence value of greater than one.

We do not use equivalisation in PI, except in section 7 of the main publication and when comparing to the overall distribution in Tables 4.6 and 4.7 of the table pack.

Ethnic group

The ethnic group to which respondents consider that they belong. The FRS questions are in line with Government Statistical Service (GSS) harmonisation guidance. The categories are:

White
Mixed or Multiple ethnic groups
Asian or Asian British
Black or African or Caribbean or Black British
Other ethnic group.

For Northern Ireland, ‘Irish Traveller’ is included in ‘Other ethnic group’. For England, Wales, and Scotland, ‘Gypsy or Irish Traveller’ is included in ‘White’.

‘Arab’ has been included in ‘Other ethnic group’ due to small sample sizes.

Ethnic background is self-declared; data is available for known declarations and excludes ‘choose not to declare’ and ‘unknown’.

Family Resources Survey (FRS)

The FRS is one of the largest cross-sectional household surveys in the country. From April 2011, the target achieved UK sample size for the FRS was reduced by 5,000 households from 25,000 to 20,000 households a year. It should be noted that due to COVID-19, there was a smaller achieved sample size in FYE 2021 and FYE 2022. In FYE 2023, the achieved sample size was 25,000 (30% larger than pre-COVID levels). Prior to FYE 2003 the survey covered GB; from FYE 2003 the survey was extended to cover the UK.

Gross income

Total income a pensioner receives from all sources before any outgoings, tax, or housing costs.

Head of pensioner unit

If the Household Reference Person (HRP) does not belong to the pensioner unit, then the Head of the pensioner unit is simply the first person from that pensioner unit, in the order they were named in the interview. If the HRP does belong to the pensioner unit, they are also the Head of that pensioner unit.

Household

One person living alone or a group of people (not necessarily related) living at the same address who share cooking facilities and share a living room or sitting room or dining area. A household consists of one or more benefit units.

Household Reference Person (HRP)

The highest income person in a household.

in a single-adult household, the HRP is simply the sole householder (i.e., the person in whose name the accommodation is owned or rented)
if there are two or more householders, the HRP is the householder with the highest personal income, taking all sources of income into account
if there are two or more householders who have the same income, the HRP is the elder.

Before April 2001, the HRP was known as the Head of Household. Where we refer to ‘Head’ in tables relating to households, this is the HRP. The Head of the pensioner unit will not necessarily be the HRP (see Head of pensioner unit).

Housing costs

Housing costs are made up of rent (gross of housing benefit), water rates, community water charges and council water charges, mortgage interest payments (net of tax relief), structural insurance premiums (for owner occupiers); and ground rent and service charges.

Net incomes in PI are presented either on a BHC or AHC basis, the definitions of which are:

before housing costs (BHC): Net income before the housing cost aspects listed above are taken away
after housing costs (AHC): Net income after the housing cost aspects listed above are taken away.

Capital mortgage repayments are not deducted as a Housing Cost as this is regarded as an asset being accrued and not a cost.

In a multi-benefit unit household, housing costs are attributed to the first pensioner unit (the pensioner unit with the HRP). This means that for a minority of pensioner units, housing costs will not be attributed to them.

Income distribution

The spread of incomes across the population.

Marital status

This is the person’s marital status:

married or civil partnership: currently married or in a civil partnership, and not separated from spouse (excludes temporary absences)
cohabiting: not married nor in a civil partnership, but living as a couple
single: is not currently cohabiting and is not married nor in a civil partnership.

Mixed-age pensioner couples

A couple where one member is above SPa and the other is below. Used in comparison with couples where both members are over SPa.

Net income

Net income is gross income with direct taxes including Council Tax payments deducted. Net income may be presented on a BHC or AHC basis. See ‘Housing costs’ for more detail.

Occupational pension

An occupational pension scheme is an arrangement an employer makes to give their employees a pension when they retire. Employees may become a member of an employer’s pension scheme on a voluntary basis. Until 6 April 2016, Defined Benefit occupational pension schemes could be contracted into or out of the Additional State Pension. This was abolished with the introduction of the New State Pension. The contracting out of Defined Contribution occupational pension schemes was abolished in 2012.

Pensioner unit

Benefit units who are a pensioner couple, single male pensioner, or single female pensioner. Pensioner benefit units may also include any dependent children, but this is uncommon. In FYE 2023, just over half a per cent of pensioner units included dependent children.

Pension Credit

An income-related benefit made up of Guarantee Credit and Savings Credit. Guarantee Credit tops up the claimant’s income to a guaranteed level. Savings Credit is an extra amount for people who have made provision for their retirement above a certain threshold. Savings Credit was abolished for new claimants on 6 April 2016, so most people who reached SPa after 6 April 2016 are not eligible for Savings Credit. New claims for Savings Credit can still be made by pensioner units who have reached SPa prior to 6 April 2016.

Personal pension

A pension provided through a contract between an individual and the pension provider. The pension which is produced will be based upon the level of contributions, investment returns and annuity rates. A personal pension can be either employer provided or privately purchased. Different forms of personal pension include:

Group Personal Pension: Before automatic enrolment, some employers who did not offer an occupational pension scheme may have arranged for a pension provider to offer their employees a personal pension instead. The employer may have negotiated special terms with the provider that means the administration charges are lower than those for individual personal pensions. Although they are sometimes referred to as company pensions, they are not run by employers and should not be confused with occupational pensions, which have different tax, benefit, and contribution rules. Note that some companies may still offer Group Personal Pensions in addition to their occupational pensions
Group Stakeholder Pension: As with Group Personal Pensions, an employer can make an arrangement with a pension provider and offer their employees a Group Stakeholder Pension (see Stakeholder Pension)
Stakeholder Pension: Enables those without earnings, such as non-earning partners, carers, pensioners, and students, to pay into a pension scheme. Almost anybody up to the age of 75 may take out a stakeholder pension and it is not necessary to make regular contributions.

Read more information on personal pensions.

Private pension

Private pensions include occupational pensions (also known as Employer-Sponsored pensions) and personal pensions (including Stakeholder pensions). People can have several different private pensions at once. In previous years only one of these pensions could be contracted out. The contracting out of Defined Benefit occupational schemes was abolished in April 2016 with the introduction of the New State Pension. The contracting out of Defined Contribution pension schemes was abolished in 2012.

Region

Regional classifications are based on the standard statistical geography of UK Regions, as defined by ONS: nine in England, and a single region for each of Wales, Scotland, and Northern Ireland. Tables will also show statistics for the UK, GB, and England as a whole.

Read more information on geographical terms used in official statistics.

Disaggregation by geographical regions is presented as three-year averages. This presentation has been used as single-year regional estimates are considered too volatile. Estimates for the UK, however, are shown as single-year estimates for the latest available year. Although the FRS sample is large enough to allow some analysis to be performed at a regional level, it should be noted that no adjustment has been made for regional differences in the cost of living, as the necessary data is not available.

Sampling error

The uncertainty in the estimates which arises from taking a random sample of the household population. The likely size of this error for a particular statistic can be identified and expressed as a confidence interval.

Sources of income

benefit income: including State Pension, income-related benefits, and disability benefits, as well as other types of benefits such as Winter Fuel Payments and Carer’s Allowance
occupational pension income: including employee pensions associated with an employer and workplace
personal pension income: including personal pensions, annuities bought with lump sums from personal pensions, trade union and friendly society pensions
investment income: including interest from ISAs and other savings accounts, unit trusts, bonds, stocks, and shares
earnings income, including:
- wages and salaries: for a respondent currently working as an employee, income from wages and salaries is equal to gross pay before any deductions, less any refunds of income tax, any motoring and mileage expenses, any refunds for items of household expenditure and any Statutory Sick Pay or Statutory Maternity Pay, plus bonuses received over the last 12 months (converted to a weekly amount) and any children’s earnings from part-time jobs
- self-employed income: the total amount of income received from self-employment gross of tax and national insurance payments, based on profits (where the individual considers themselves as running a business) or on estimated earnings or drawings otherwise. Excludes any profits due to partners in the business. Any losses are recorded as such. From FYE 2022, income received from director’s dividends is included in the estimates following an addition to the FRS. From FYE 2023 they are only included where directors are classed as employees following a methodological review. The income is treated as income from earnings.
other income: benefits from friendly societies, income received for dependent children, maintenance payments and from August 2020, free TV licences for those aged 75 and over who received Pension Credit.

The below applies to FYE 2021 and FYE 2022 data only:

The calculation of self-employed income and therefore total individual income does not directly include grants received from SEISS.

Wages are treated as earnings income rather than state support, irrespective of any support payments from the CJRS that the respondent’s employer was receiving in respect of their employment.

In FYE 2023, Cost of Living Payments and wider support schemes were included as part of the income variables on the Family Resources Survey (FRS) dataset and are therefore also present in the PI data. PI data tables using variables that include the calculation of pensioner unit income reflect the Cost of Living Payments that the pensioner unit received. This includes: Pensioner Cost of Living Payment, Disability Cost of Living Payment, low income benefits and tax credits Cost of Living Payment, Council Tax Rebate, Energy Bills Support Scheme, Warm Home Discount and Welsh Fuel Support Scheme. For more information, please see the FRS background information and methodology.

State Pension

The State Pension is a payment made to qualifying individuals who have reached SPa. A new single-tier State Pension launched on 6 April 2016 for people who reach SPa on or after April 2016, to replace the previous system. This consolidated the basic State Pension and Additional State Pension into one single amount.

People who reached SPa before 6 April 2016 continue to receive the basic State Pension and Additional State Pension if eligible. Read more information on the State Pension.

State Pension age (SPa)

SPa is the earliest age you can start receiving your State Pension. For FYE 2023 data, individuals are defined to be of SPa based on their date of birth and the date of interview. Since 6 April 2010, the SPa has been gradually increasing. The FRS data contained in this report were collected throughout the FYE 2023, during which the SPa for pensioners remained at 66 years, the same as FYE 2022. Proposed increases to the SPa are expected to be phased in between 2026 and 2028, bringing the SPa up to 67 years.

A breakdown of the increases can be seen in the State Pension age timetables and details of planned changes to SPa can be found online. Read further guidance on calculating State Pension eligibility age.

State support

An individual is in receipt of state support if they receive one or more Benefits or are being paid Tax Credits.

Tax Credits

Working Tax Credits and Child Tax Credits are paid by HMRC. Tax Credits are being phased out, as they are being replaced by Universal Credit.

Triple Lock

The basic State Pension and the new State Pension increases every year by whichever is the highest of the following:

earnings - the average percentage growth in wages (in GB)
prices - the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)
2.5%.

In FYE 2023, the increase was 3.1%, in line with CPI inflation.

Working-age

Adults (see “Adult” and “Child”) under SPa.

Note, our statistical practice is regulated by the Office for Statistics Regulation (OSR).

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1. Introduction

A. Status of the Statistics

Accredited Official Statistics

B. Background

Relevance

Accessibility

Clarity

Timeliness and Punctuality

Confidentiality, security, and transparency

C. Context of the statistics

Pensioner demographics

Considerations when interpreting average pensioner incomes

D. Policy changes

State Pension

Pensioner TV licences

Up-rating

Council Tax

Housing Support for private renters

Cost of Living Payments

Warm Home Discount

Wales Fuel Support Scheme

Energy Bills Support Scheme

E. Source of the statistics

F. Strengths of the statistics

G. Limitations of the statistics

FRS data collection for FYE 2023

H. Coherence and comparability

Coherence

Comparability

I. Definitions and terminology

Pensioner Units

Age of pensioner units

Income

Income measures

J. Alternative data sources

K. Quality Management

Quality Assurance (QA) during development

Routine Quality Assurance

Independent assessors

Suitable data sources

L. Feedback

M. Acknowledgements

2. Statistical Presentation

Overview dissemination process

Points to Note about Statistical Concepts and Definitions

3. Methodology

A. Rounding and accuracy

B. Measuring living standards

C. Grossing

D. Adjusting for inflation

E. Adjustment for individuals with very high incomes

F. Negative incomes

G. Output standards for ethnic groups

H. Further information

4. Reliability of estimates

A. Estimating and reporting uncertainty

B. Measuring the size of sampling error

5. Estimating and interpreting uncertainty in PI

A. Calculating uncertainty in PI

B. Interpreting estimates of uncertainty in PI

Table M1.1: Uncertainty surrounding estimates in PI FYE 2023

Table M1.2 Growth in average incomes of pensioner units, FYE 2013 to FYE 2023, and FYE 2022 to FYE 2023

6. Households Below Average Income (HBAI) and Pensioners’ Incomes (PI)

7. Glossary

Adult

Age

Automatic enrolment

Benefit unit or family

Benefits

Child

Confidence interval

Council tax

Equivalisation

Ethnic group

Family Resources Survey (FRS)

Gross income

Head of pensioner unit

Household

Household Reference Person (HRP)