Chart that tells a story . . . pensions and earnings

What does this show?

It's the basic state pension as a percentage of average weekly earnings since the 1970s. Its value peaked in 1979, when it was 26 per cent of the average UK wage. These payouts fell until 2008 when they hit 15.8 per cent. The DWP data only goes as far as 2013.

What are the underlying factors?

The chart focuses solely on the basic state pension, which had its origins in William Beveridge's concept of an income that would afford the recipient "freedom from want", albeit at the minimum level of subsistence. "In truth it was never that", said Hugh Pemberton, an expert in UK pensions history at the University of Bristol.

"This graph shows well the collapse in its value that resulted from the Thatcher government's decision, in 1980, to change its form of pension indexation to follow retail prices rather than the growth in average earnings," he said.

Gemma Tetlow of the Institute for Fiscal Studies explained that, as national average earnings have generally risen faster than prices since 1980, the relative generosity of pensions has been eroded.

So what happened in 2008?

The line on the chart moves upwards because prices were rising faster than earnings, so the relative value of pensions began to rise, albeit slowly.

The rise accelerated in 2010 after the coalition government restored the link between pension and earnings via the "triple lock". This allows pensions to rise by earnings, prices or 2.5 per cent, whichever is greater.

What would have happened if the link with earnings had remained?

If pensions had been linked to earnings, the basic state pension would be around £160 a week, rather than the £116 a single person receives. More than 12m people in the UK are over state pension age.

Does this data reflect all pension payouts?

No. The UK state pension system is complicated and the product of decades of policy changes. There are four main components: basic state pension, earnings-related benefits, flat-rate non-contributory benefits and means-tested benefits. Each has been tinkered with and, as systems and rules have been introduced, entitlements under previous systems have often been preserved.

"The state pension should really be the safety net base for all other pensions to be built on, in my view, but the base was so inadequate that pensioners trying to live on it would still be in poverty in most cases," said Ros Altmann, an independent pensions expert.

Do the non-pension benefits make good the difference?

Ms Altmann said pensioner "freebies" such as winter fuel payments and bus passes are better considered as part of the state pension, rather than as separate. She pointed out the winter fuel payments were introduced in response to the furore that greeted one particularly tiny inflation-based rise in the basic state pension in the early noughties.

What about the flat-rate state pension?

In April 2016, the system will be radically simplified, with a basic state pension of at least £148 a week (around 23 per cent of average 2013 earnings) replacing many of the contributory and means-tested elements. But claimants will need a 35-year record of national insurance contributions, or credits, to qualify for the full payout.

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