Pensioners living in golden era as income rise outstrips workers’
Pensioners enjoyed a golden era between 1977 and 2016, with official figures revealing that their incomes have nearly tripled in real terms, rising much faster than the incomes of working people.
The average gross income for a pensioner household soared to £29,000 in 2016 from £10,500 in 1977, after the figure was adjusted for inflation, according to the Office for National Statistics. Over the same period, the gross income for working households doubled from £20,200 to £41,900.
However, retired workers relying on a state pension have fared much worse than those with private schemes. The ONS figures showed that inequality between rich and poor pensioners has widened significantly since 1977.
Critics said the statistics have been skewed by a number of relatively young people classed as pensioners who are still working. The former pensions minister Ros Altmann said: “There is no distinction between younger ‘pensioners’ – those just reaching a minimum age for the statistical cut-off – and older pensioners, especially women who never had a chance to build up any private income and were marginalised by the state pension system too.”
The figures will reopen the fractious debate over intergenerational fairness, with baby boomers accused of grabbing an unfair share of the national cake – and leaving today’s young people with much poorer prospects for their own retirements.
The number of retired households enjoying very high incomes has leapt, said the ONS. In 1977, just one in 500 pensioners had an income of £40,000 a year or more in today’s money, but now one in 10 receive pensions of this amount or more.
The ONS said the disposable income of pensioners has on average risen by 2.8% a year in real terms since 1977, compared with 2.1% for non-retired households.
Behind the growth incomes was a steep rise in private pensions, said the ONS, which increased sevenfold over the period. The state pension has also doubled in value in real terms, rising from £5,600 in 1977 to £11,000 in 2016.
Much of the growth in private pensions has come from company schemes that have paid out as much as two-thirds of an employee’s final income at retirement. But most of these schemes have closed in the private sector, leaving today’s workers dependent on poorer quality stock-market-based schemes.
As life expectancies rise and the state’s financial burden becomes unsustainable, what next for younger generations?
“Pensioners have never had it so good,” said David Newman, the head of pensions at asset managers Close Brothers.
“Gold-plated final-salary pensions have been instrumental in boosting incomes over the past 40 years, while the income provided by the state pension has doubled over the period, with the ‘triple lock’ maintaining growth more recently. But as life expectancies rise, the financial burden for the state becomes unsustainable, and the most lucrative defined-benefit pension schemes become a thing of the past, the question is: what next for younger generations?”
The ONS added that the economic downturn since 2007-08 has had a much smaller effect on pensioners than on working households. It said the median income for pensioners in 2016 was 13% higher in real terms than in 2008. But for working households, median incomes actually declined by 1.2% over the period.
Adam Corlett from the Resolution Foundation, whose research has previously found retired households to be better off than working households, said: “Today’s stats show again that the economy has delivered very different results for retired and working households over the last decade.
“This is great news for pensioner living standards but has been accompanied by a rise in inequality between retired households as some have benefited more than others.”
But groups representing retired households said the figures should be warmly welcomed. Anna Dixon of the Centre for Ageing Better said: “The news that average pensioner incomes after inflation have risen over the last 40 years is positive. We have seen a dramatic and necessary reduction in pensioner poverty since the 1970s.
“However, these averages mask inequalities. In particular the growing disparity between those who have been able to save into a private pension and those who have not. Those in receipt of a private pension have a disposable income 60% higher than those without.”