Recently retired pensioners’ incomes have risen by 13 per cent in real terms over the decade to 2016, but 6 out of 10 still receive the majority of their income from the state.
The figures come from the latest DWP/National Statistics Pensioners Incomes Series research published today.
The research shows that there are more pensioners at the top of the nation’s overall income distribution than at the bottom, with pensioners making up 19 per cent of the top fifth of richest Britons and 14 per cent of the lowest income quintile.
The average median income of all pensioners in 2015/16 was £296, up from a real-terms figure of £258 in 2005/06. This figure reflects income after deductions of direct taxes, other payment such as pension contributions and housing costs. The report says this change reflects increases in occupational pension, earnings and benefits.
Older pensioners are worse off than younger pensioners, with over-75s receiving 75 per cent of the income of younger pensioners. This in part reflects income from work received by younger pensioners.
The median income of pensioner couples in 2015/16 was more than twice that of single pensioners and the difference has increased slightly over the past decade. In 2005/06 pensioner couples’ average income was £183 more than the median single pensioner’s income, but by 2015/16 the difference had increased to £231. Almost four in ten recently retired single pensioners – 36 per cent – were in receipt of income- related benefits; this compares with 10 per cent of recently retired pensioner couples.
Single male pensioners had higher average incomes than females, particularly amongst under-75s. Single men in this age group had an average weekly income of £224 per week compared to women who had an average weekly income of £203 per week.
Pensioner couple incomes were lowest in Wales and the West Midlands with couples in the South East having the highest median incomes.
Royal London director of policy Steve Webb says: “These startling new figures challenge the notion that pensioners will inevitably get richer and richer. Pensioner incomes in 2015/16 were no higher than a year earlier and newly retired pensioners were actually less well off than the year before. In addition, more than half of all pensioners get the majority of their income from state pensions and benefits.
“Whilst there are clearly some pensioners who enjoy good company pensions and have benefited from house price inflation, there are clearly also many who are not in such a fortunate position. Any change to policy on state pensions need to take full account of the diversity of experience of pensioners in Britain today, and not simply assume that pensioner living standards will keep on rising.”
Aegon pensions director Steven Cameron says: “Pensioner incomes have improved significantly in recent years, especially the proportion of income derived from workplace and private pensions. Indeed today’s retirees are set to be the wealthiest we’ve ever seen, benefiting from an era of ‘gold plated’ defined benefit pension schemes.
“While this is a positive trend, the picture is almost certain to be different for future generations as defined benefit schemes become increasingly rare and retirement income becomes more directly linked to the personal saving contributions made by the individual and their employer into ‘defined contribution’ schemes over their working life.
“It’s particularly interesting to see growing incomes for the recently retired, but this doesn’t necessarily mean their retirement pot is in better health than those that have gone before them. Retirement is becoming more of a phase, and many are choosing to continue work beyond retirement age, to supplement income from pensions.
“In this era of pension freedom and flexibility, the real challenge is determining how much money people need to save to meet their varying income needs at different stages of the retirement journey. This takes complex planning and many would benefit from seeking professional advice.”