Conversations with ChatGPT - COVID-19 & UK Pension Poverty

31 Jul 2023

Not all information that appears in this article will be accurate. At time of writing, ChatGPT only has access to internet data up to September 2021, meaning that information produced after this point may not be represented in its answers. These articles are an experiment to test how ChatGPT responds to different questions that it may or may not have clear, accurate answers to.

Angela is a persona created to converse with ChatGPT.

I’ve been seeing more and more in the media about poverty in retirement. It’s a vital topic and one that requires clear insight to tackle it best. The COVID-19 pandemic is certain to have had a large effect on this – a recent study from the Institute for Fiscal Studies has found that those who retired early in the pandemic are more likely to face poverty, in part due to some in this group having been 'forced' into early retirement. For some variety, this time I’m testing Claude, by Anthropic.

How might the COVID-19 pandemic have affected UK pension poverty levels?

Here are a few ways the pandemic may have impacted pensioner poverty in the UK:

• Many who took early retirement did so involuntarily due to job loss or health concerns. This meant they retired with smaller pensions than planned, increasing their risk of poverty in retirement.
• Lower interest rates reduced income from annuities and savings. Annuity rates dropped to record lows during the pandemic, providing less retirement income for each pound saved.
• The economic downturn and market volatility reduced the value of defined contribution pensions invested in the stock market. This affected the incomes of those entering retirement during or after the pandemic
• Increased unemployment and furlough reduced pension contributions going into defined contribution pots for future retirees, potentially increasing their risk of future pensioner poverty.
• Pre-existing pensioner poverty was made worse by higher costs of living during the pandemic, including increased heating and food costs during lockdowns.
• However, the triple lock protection for the state pension continued, meaning the basic state pension rose significantly during the pandemic. This provided a safety net for some.

Overall, the IFS analysis seems reasonable. Involuntary early retirement, reduced pension pots, and a squeeze on incomes have likely contributed to higher pensioner poverty from the pandemic, reversing progress made in recent years. However, the impact remains to be fully seen over the next 5-10 years.

This analysis makes it look a bit like a barrage from all sides – reduced potential for contributions, higher cost of living, reduced value of pensions and lower interest rates are certain to have hit a very high proportion of people. Also, the triple lock was suspended in the 2022/23 tax year due to distorted wage growth figure as a result of COVID-19. Thought this was brought back in April 2023, the year suspension is likely to have had an impact.

What effect is the temporary suspension of the triple lock likely to have had?

You're absolutely right, the temporary suspension of the triple lock pension policy in 2022/23 is likely to have negatively impacted some pensioners:

• In 2022/23 pensions rose by 3.1%, in line with inflation, rather than the 8.3% they would have risen under the triple lock. This represented a loss in income for pensioners.
• The impact was largest for those solely reliant on the state pension. Their income failed to keep up with the rapid rise in cost of living. This increased financial hardship for some.
• Women and older pensioners were hit harder on average, as they are more likely to be dependent on the state pension.
• However, the impact was mitigated by other government support like the energy price guarantee, cost of living payments and winter fuel payments. So some of the lost pension increase was compensated for..
• Now that the triple lock has been restored in April 2023, the basic state pension has increased in line with inflation again. This will help protect pensioners against cost of living pressures.
• But the one year suspension may have longer term effects, as pensioners have permanently lost out on the compounding higher income they would have received by now.

Overall, the one year triple lock suspension likely increased financial difficulties and pensioner poverty. But other government measures helped cushion the impact, and its restoration will provide protection going forwards.

Overall, it seems like there is a wide scope for causes of pension poverty. However, referring back to my initial intentions, that scope can help to work out how to tackle it best.

Going forward, how can the UK help to reduce pension poverty levels that have been exacerbated by the COVID-19 pandemic, especially for those more reliant on the state pension?

ChatGPT responded:

Here are some possible ways the UK could help reduce pensioner poverty going forward:

• Maintain the triple lock - Regular above-inflation increases to the state pension through the triple lock will help protect the most vulnerable pensioners.
• Provide additional cost of living support - One-off payments, heating allowances or discounts on energy bills can top up state pensions during times of high inflation.
• Extend pension credit - Improving uptake and eligibility for pension credit can boost incomes for the poorest pensioners.
• Re-evaluate the state pension age - A flexible pension age could help those forced into involuntary early retirement.
• Support returning to work - Providing training and flexible jobs could help pensioners return to work to supplement income.
• Develop low-cost housing - More social and affordable housing can reduce living costs for those reliant on the state pension.
• Improve pension planning access - Providing resources and advice on pension planning and long-term finances.
• Review auto-enrolment - Looking at ways to extend workplace pension access to lower income groups.
• Develop community support networks - Local authorities and charities providing support services for vulnerable pensioners.

A combination of protection for the state pension, financial support, employment policies, housing provision, advice services and community support could all help tackle rising pensioner poverty.

On the face of it, that looks like a relatively wide-ranging and potentially achievable list - Claude seems to be slightly more advanced when making suggestions when compared to ChatGPT.

Regarding the points themselves, the improvement of pension planning access and a review of auto-enrolment are both crucial for reducing poverty in the next generation of pensioners. I think a greater discourse around how the UK can improve the future for those suffering from poverty in retirement can help to hasten the progression.

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