Background In 1997 approximately two million people aged 60 years or over were experiencing poverty in the UK. As part of a broader programme of action to combat pensioner poverty, the UK Government raised real pension incomes of low-income pensioners by around a third through the introduction in 1999 of the Minimum Income Guarantee (MIG). This study explores the implications for pensioners’ mental wellbeing of this increase and its potential effect on geographical health inequalities in England.

Methods We explore mental wellbeing outcomes of men and women of state pension age (65 years or above and 60 years or above, respectively) from scores on the General Health Questionnaire (GHQ-12) collected as part of the British Household Panel Survey. We use a panel difference-in-difference estimation procedure. We compare the mental wellbeing of pensioners receiving MIG to that of low-income pensioners (household income below 60% of median incomes) not claiming MIG, from 1998 (pre-reform) to 2002 (three years post-reform). To investigate geographical inequalities we use quartiles of the of the average, extent and concentration distributions of the local-authority-level English Index of Multiple Deprivation. Models controlled for age category, marital status and survey year.

Results The analysis sample consisted of 703 and 1,273 person-year observations for men and women, respectively. Between 1998 and 2002, 135 (38%) of women and 55 (28%) of men in the sample were claiming MIG at any one time. We found an improvement in the mental wellbeing of men living in the most deprived areas, with a decrease of the GHQ-12 score of 3.33 points (95% CI: -6.92, -0.74). This estimate was similar across all measures of local authority deprivation. No other significant results were found, large standard errors possibly accounting for the null findings.

Conclusion This study provides initial evidence that an increase in pension income for low income pensioners can contribute to the reduction of health inequalities, especially for men. This needs to be considered in the terms of future state pension policies.