The latest research published by the Office for National Statistics (ONS) showed pensioner incomes are rising faster than working households’, but inequality among retired households is on the rise.
In its paper ‘What has happened to the income of retired households in the UK over the past 40 years?’ the ONS looked at pension wealth since 1977 until the financial year ending (FYE) 2016.
It found during that period the disposable income (the amount of money for spending and saving after direct taxes) of retired households increased at an average annual rate of 2.8%. This compared with average annual growth for working households at 2.1%.
In 1977 about one-fifth (21%) of retired households had a disposable income of more than £10,000 a year but by 2016 this had increased to 96% of retired households.
The body found the mean gross income of retired households (which includes cash benefits before direct taxes) was £29,000 in 2016, almost three-times higher in real terms than in 1977, when it was just £10,500.
The ONS said more than half of the extra money for pensions could be attributed to private pensions income alone, which increased almost sevenfold over the years.
It also pointed out that income from the State Pension almost doubled between 1977 (£5,600) and 2016 (£11,000.) helped by the triple lock.
Private pension gives 14x greater income
The statistics showed inequality among retired households started to decline after the 1980s. The ONS said one reason for the fall was more households were getting income from private pensions, from 45% in 1977 to almost 80% in 2016.
Despite this, from 2010 income inequality between retired households grew again. The ONS said this indicated cash benefits like the State Pension had become less effective at reducing inequality in recent years.
Meanwhile, the research found the gap between households with a private pension and those without has been increasing since 1977.
In 2016, those with a private pension had an income 14 times higher than those who did not receive any private pension income, the ONS found.
‘Living off former glories’
While the statistics appeared positive on the whole, Royal London director of policy Steve Webb remained skeptical.
“In previous generations being elderly was a by-word for being poor. That has changed dramatically in the last forty years with pensioner incomes nearly trebling while the incomes of the working age population rose more slowly,” he said.
“The big danger is that we are living off former glories. The big growth in pensioner incomes is driven by people retiring with good company pensions. But today’s workers are not building up pensions that are anywhere near as generous.”
He added: “Whilst pensioner poverty rates have dropped sharply this could go into reverse if today’s workers do not build up their own pensions at a much faster rate than they are at present.”