Pensioner poverty over the next decade: what role for tax and benefit reform?

Alissa Goodman, Mike Brewer, Carl Emmerson, Alastair Muriel, James Browne and Gemma Tetlow, Institute for Fiscal Studies

[Project number 20108]

We are using microsimulation methods in this study, evolving a population based on the English Longitudinal Study of Ageing (ELSA) forwards in time. In order to predict mortality rates appropriately we require mortality tables giving differential mortality by age, gender and social class/education.

The study aims to set out what pensioner poverty would look like over the next ten years under a number of different scenarios for pensioner benefits, tax credits and taxes. We are simulating how the incomes of those aged over the state pension age will evolve over the period to 2017. The IFS tax and benefit model will then be used to estimate levels of pensioner poverty under each alternative tax and benefit system.

A final report on both the distribution of pensioner incomes and pensioner poverty, under a no change policy scenario and under different policy options for reducing pensioner poverty, will be launched at a conference at the IFS in June 2007.

In order to simulate the demographic characteristics of the ELSA sample going forwards, we are using a variety of data sources (British Household Panel Survey, information from the Government Actuary's Department projections, etc). We wish to us ONS LS data for the 'mortality module', predicting death rates in the population each year. This is important since the extent to which early deaths are disproportionately drawn from the bottom of the lifetime income distribution will affect measures of income poverty.