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Poverty risk six times greater for seniors lacking pensions

“This ‘pension factor’ is particularly powerful for improving the economic security of vulnerable older households - women and members of racial/ethic minority groups,”

Washington, D.C (31 July 2009) – Defined benefit (DB) pension income plays a critical role in reducing the risk of poverty and hardship among seniors according to an American study released yesterday.

The study entitled, The Pension Factor: Assessing the Role of Defined Benefit Plans in Reducing Elder Hardships was published by the U.S.-based National Institute on Retirement Security.

It found rates of poverty among older American households lacking pension income were about six times greater than those with such income. The analysis also finds that pensions reduce – and in some cases eliminate – the greater risk of poverty and public assistance dependence that women and minority populations otherwise would face.

“This analysis reveals that pensions have a unique, independent, and positive impact on older Americans economic well-being. This ‘pension factor’ is particularly powerful for improving the economic security of vulnerable older households - women and members of racial/ethic minority groups,” said Beth Almeida, executive director of the National Institute on Retirement Security.

“Ensuring older Americans have access to pensions in retirement,” she continued, “can help relieve some of the enormous pressures on federal, state and local budgets. We calculated a savings of some $7.3 billion in public assistance expenditures in 2006, attributable to pensions. These are sizable dollars.”

The Pension Factor finds that pensions have helped substantial numbers of older Americans avoid material hardships associated with inadequate food, shelter, and health care, and also avoid reliance on public assistance. More specifically, key findings indicate that pension receipt among older American households in 2006 was associated with:

  • 1.72 million fewer poor households and 2.97 million fewer near-poor households
  • 560,000 fewer households experiencing a food hardship
  • 380,000 fewer households experiencing a shelter hardship
  • 320,000 fewer households experiencing a health care hardship
  • 1.35 million fewer households receiving means-tested public assistance

The analysis in The Pension Factor was conducted using the U.S. Census Bureau’s Survey of Income Program Participation (SIPP) panels from 1996, 2001, and 2004. The study sample included SIPP respondents age 60 years or older and all households with a head age 60 and older, who had records in both the Pension and Adult Well-Being topical modules of the survey. This totalled 10,259 households.

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The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working familiesand to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE