Income of recent retirees 1/5th higher than older pensioners
- Aegon analysis of government Pensioners’ Income Series* data shows the weekly income of recently retired pensioner households is one fifth (20%) higher than less recently retired pensioners.
- The main driver behind the income difference is from earnings – highlighting the growth of a transitional approach to retirement
- Over a quarter (26%) of the income for recent retiree households comes from earnings, double the proportion (13%) for non-recently retired pensioners.
- The decline in defined benefit pensions means future waves of retirees cannot assume their income will be higher than previous generations.
Aegon analysis of the latest government figures show significant differences by age in pensioners’ household incomes as the average weekly income of recent retirees is one fifth (20%) higher than that of older pensioners.
The Pensioners’ Income Series published annually by the Department for Work and Pensions (DWP) contains information on the sources and distribution of pensioners’ household income, used to inform government policies on topics such as ageing and the distribution of wealth.
Analysis of pensioner income shows the net average weekly income (after income tax, NI and council tax) of recently retired pensioner households is £392 whereas the net average weekly income of non-recently retired pensioner households is £326**. This represents a 20% difference between the two groups. The main driving force behind the difference is from earnings income. Over a quarter (26%) of recent retiree income is from earnings compared to just 13% for older pensioners***. This suggests recent retirees are taking a phased approach as they transition from work into retirement.
The data also highlights an unequal distribution in income between pensioner age groups. Just 13% of pensioner couples where the head is over 75s have an income in the top fifth of the pensioner net income distribution compared to nearly a quarter (23%) of pensioner couples where the head is under 75****.
The figures are based on average (median) incomes and there will be many retirees with incomes substantially below these figures.
Steven Cameron, Pensions Director at Aegon, comments:
“The Government figures show that older pensioner households are lagging behind recent retirees when it comes to their income. Changing retirement patterns could be a reason for this as many people are now adopting a transitional approach to retirement by continuing in employment after traditional retirement ages, while reducing their working hours over a period of time rather than a ‘cliff edge’ approach.
“The figures show that since 1995, earnings income for new retirees has more than doubled from an average of £64 to £168 per week on top of personal and state pension incomes.
“For individuals in the early stages of retirement, many of who are in the Baby Boomer generation, pensioner poverty generally is at an all-time low, but as these figures are based on average (median) incomes, it must be remembered that there are many retirees with incomes substantially below the average figures.
“The retirement income of the post-war generation has been boosted by favourable economic conditions. Many but by no means all retirees will also be benefiting from generous defined benefit pensions, but this feature will tail off for future retirees, making it unlikely that each future wave of newly retired will have average incomes higher than the previous one.
“Policymakers need to ensure they look at the changing income profiles of pensioners to understand the distribution of wealth across this large and growing proportion of the population. Adopting a ‘one-size fits all’ approach would be dangerous and risks overlooking what can be significantly different financial challenges facing pensioner groups of different ages and wealth.”
Pensioner households consist of single pensioners and pensioner couples. This is more formally defined as a ‘pensioner unit’.
A pensioner unit is defined as ‘recently retired’ if the head of the unit is less than five years above the State Pension age.
For pensioner couples, the ‘head’ of a pensioner unit is the member of the household with the highest income
Average income used for calculation is the Median number. Average income figures used are Before Housing (BHC).
**Data Tables: Pensioners’ income series 1994/95 to 2017/18 (Table 2.12)
***Data Tables: Pensioners’ income series 1994/95 to 2017/18 (Table 2.12)
****Data Tables: Pensioners’ income series 1994/95 to 2017/18 (Table 4.2)
Notes to Editors
- In the UK, Aegon offers retirement, workplace savings and protection solutions to well over three million customers and employs approximately 3,450 staff. More information: aegon.co.uk
- As an international life insurance, pensions and asset management group based in The Hague, Aegon has businesses in over twenty five markets in the Americas, Europe and Asia. Aegon companies employ over 28,000 people and have millions of customers across the globe. Further information: aegon.com
*Figures correct as of January 2019
Aegon is a brand name of Scottish Equitable plc. Scottish Equitable plc, registered office: Edinburgh Park, Edinburgh EH12 9SE. Registered in Scotland (No. 144517). Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 165548. An Aegon company. www.aegon.co.uk
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