Figures reveal rise in income for pensioners but campaigners say many still live in poverty and hit out at plan to make retired work for their money
One in five retired households has an annual income above £42,000 a year, according to official figures, which also reveal a widening gap between pensioner “haves” and the working “have nots”.
The Office for National Statistics said that pensioners had enjoyed significantly faster increases in income than working households over the past 30 years.
Between 1977 and 2010-11, the incomes of pensioners rose by two and a half times in real terms, outstripping the growth in the economy. Over the same period working people saw their income grow just two times.
Pensioner incomes grew “almost every year”, added the ONS, while the incomes of workers stagnated during recessions.
Charity Age UK said 1.7 million pensioners still lived in serious poverty and rejected suggestions that payments had risen disproportionately.
But the figures will fuel controversy over the baby boomer generation who enjoyed full employment and rising house prices and are now receiving final salary pensions no longer open to workers behind them.
Pensioner incomes still remain substantially below those for people in work, while the gap between pensioners remains wide, said the ONS.
The average disposable income for retired households was £17,700 in 2010-11 compared with £35,000 for households in work. In 1977, pensioners received incomes around one third of the average working person’s pay, but today the figure is closer to half.
The top 20% of pensioner couples have an average income of £815 a week (£42,380 a year) but the bottom 20% have to get by on an average of £221 a week, or £11,492 a year. Single women also receive significantly less than single men: £279 per week compared to £345.
Ashley Seager, co-founder of the Intergenerational Foundation thinktank, said: “These figures confirm what the Intergenerational Foundation has long been saying – that the current generation of retired people is very well off compared to where future generations will be when they retire.”
“Today’s young people are going to have to work much longer for a considerably smaller pension than their parents or grandparents. They will also face higher taxes over their lifetimes to pay for the generous pension promises that people now retired wrote to themselves and which are becoming completely unaffordable.”
Ros Altmann, the director general of Saga, said there was an enormous gap between the minority of rich pensioners and the less well-off majority.
“Yes, there are pensioners who have done very well from our final salary pension system and have high incomes. But these are not the majority. If you read the figures carefully you will see that the pensioners with the highest incomes are those that have kept on working. Record numbers are now working beyond age 65 and they are making a great contribution to their own and the wider economic welfare. But this should not lead people to think that all pensioners are so fortunate,” she said.
Fresh controversy over the cost to society of the growing number of elderly people erupted on Wednesday when the former head of the Benefits Agency, Lord Bichard, told a Lords select committee that the retired should be encouraged to work for their pensions – providing care for the very old, for example – or face losing some of their cash.
The peer, a member of the Lords committee on public service and demographic change, suggested the move would stop older people being a “burden on the state”.
“If you are old and you are not contributing in some way or another, maybe there is some penalty attached to that,” he said.
The committee also heard from James Sefton, a professor at Imperial College, London, and former adviser to the Treasury, who said young people were effectively subsidising the older generation. “I think they should be angry. I think the deal they are getting is poor,” he told the peers.
But Michelle Mitchell, director general of Age UK, said: “Older people are a hugely positive part of society. Over a third of people aged between 65 and 74 volunteer, a percentage that only drops slightly for the over 75s.”
She added: “We must not forget that retirement is a vastly different experience depending on your personal circumstances. For example, 40% of all people over 65 have a serious longstanding illness and 1.7 million of our pensioners live in poverty. For many of those, retirement can be an unrelenting struggle of trying to survive on a low income in poor health.”
Pensioner incomes are likely to fall from now on, warned Tom McPhail, head of pensions research at Hargreaves Lansdown. “The high-water mark of the British pension system was around the year 2000. The current generation of pensioners are enjoying the benefits of final salary schemes. But we are at the top of the hill and looking down. It will be a very different picture in 20 years’ time.
“Current pensioners are in many ways insulated from the recession. The government has hard-wired pension increases into the system, with final salary-based pensioners receiving automatic increases, while the basic state pension enjoys a triple lock [so that it rises by the higher of the consumer prices index (CPI), average wages or 2.5%]. Meanwhile, workers are seeing their wages frozen or cut during hard times.”
Need a Loan? Visit Secured Loans Broker.
View full post on Free Secured Loans Advice