Pensioners have seen their incomes increase by 13 per cent over the last decade, while non-retired households have suffered a 1.2 per cent real terms fall, new figures from the ONS show.
Pensioner household income rose to £21,770 in 2015/16, while the incomes of working population households are still yet to recover their pre-financial crisis levels, standing at £28,481.
The ONS says the growth in median income over time has not been experienced equally by all households. Over the past year, median disposable income for the poorest fifth of households rose by £700, a rise of 5.1 per cent, while that of the richest fifth of households fell by £1,000, a fall of 1.9 per cent.
ONS head of household income and expenditure analysis Claudia Wells says: ““Household incomes are above their pre-downturn peak overall, but not everyone is better off. While retired households’ incomes have soared in recent years, non-retired households still have less money, on average, than before the crash.”
Aviva head of savings and retirement Alistair McQueen says: “Today’s ONS inequality data is a tale of the haves and the have nots – when comparing retired and non-retired households. The median income for retired households has soared 13 per cent above the pre-downturn levels of 2007/08, while non-retired households have experienced a 1.2 per cent fall. The state pension triple lock has been a key driver behind this improved position for retired households, by guaranteeing an annual increase of at least 2.5 per cent since 2010.
“However, the importance of private sources of income in retirement is arguably making a bigger difference. For the first time, retirement income from private sources – pensions, annuities and investments – now represents 52 per cent of median incomes in retirement. When records began in 1977, private sources of income represented just 33 per cent of median incomes in retirement.
“Rising incomes in retirement is a good thing, however the divergent experiences of the retired and non-retired will place increasing political pressure on the state pension triple lock. Government policy is beyond an individual’s control, but private planning is not. It is therefore increasingly important for people to take control of their own retirement planning. Private sources of income will increasingly determine people’s financial wellbeing in retirement in the years to come.”
Aegon UK pensions director Steven Cameron says: “While the figures suggest there has never been a better time financially to be retired, today’s pensioner households are benefiting from two big factors. Firstly, many are receiving an income from generous defined benefit schemes. While these schemes will continue to pay out for many years to come, increasingly pensioners’ incomes will come from less generous defined contribution schemes.
“Secondly, pensioner benefits have been largely protected by recent government policy and the triple lock state pension in particular has come into focus for the high cost of providing such a generous uplift. Indeed, state benefits including the state pension account for 42 percent of today’s pensioners’ incomes.
“While auto-enrolment and the growth of defined contribution schemes go some way to offsetting the decline of DB, policy makers need to recognise that future pensioners may not be as well off as those today and this should be recognised, particularly when thinking about the future of the state pension.”
Barnett Waddingham senior consultant Malcolm McLean says: “This is all bound to add “grist to the mill” on claims of intergenerational unfairness and renew the possibility of the Government backing away from a renewal of the triple lock in 2020. They will be pleased, however, as we all should be, to note the growth in private pension saving and the contribution it is making to retired householders’ income now and hopefully more so in the future with the spread of auto-enrolment and other initiatives.
“Although we are probably still a long way short of an earlier government’s policy aim to have 60 per cent of a pensioner’s income from private saving with 40 per cent only from the state, increased private saving has to be good news for all concerned.”