Recent retirees have incomes that are now 20 per cent higher than older pensioners, according to new government data.
Aegon has analysed the Pensioners’ Income Series, published annually by the Department of Work and Pensions. This shows the net average weekly income (after income tax, national insurance and council tax) is £392 for pensioner householders that have recently retired.
In contrast it is £326 for households where the main earner was aged 75 or over.
The main driving force behind the difference is from earnings income. Over a quarter (26 per cent) of recent retiree’s income is from earnings, compared to just 13 per 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 per 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 per cent) of pensioner couples where the head is under 75.
The figures also show that since 1995, earnings income for new retirees has more than doubled from an average of £64 to £168 per week. This is on top of personal and state pension incomes.
Aegon’s pensions director Steven Cameron says: “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 strategy and reducing their working hours over a period of time rather than a ‘cliff edge’ approach.
“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.”
He adds that the retirement income of the post-war generation has been boosted by favourable economic condition and defined benefit pensions. But he points out entitlement to these pensions will tail off for future retirees, making it unlikely that each wave of new retirees 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.”