Pensioner household incomes overtake those of working age for the first time
PUBLISHED: 09:06 13 February 2017 | UPDATED: 09:06 13 February 2017
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Pensioner household incomes have overtaken those of working age equivalents for the first time, a new study found.
Elderly spending power has been boosted by a new wave of pensioners who tend to still be in work, own a home and receive generous pension pots, analysis by the Resolution Foundation for the Intergenerational Commission shows.
The As Time Goes By study, which charts income changes across different generations during the past half century, states low growth for working age households has coincided with a surge in pensioner wealth.
After housing costs, typical pensioner households are now £20 a week better off than typical working age ones, according to the report.
This is in marked contrast to 2001 when typical pensioner incomes were £70 a week lower than working age ones.
The growth appears to have come from the recent cohort of pensioners, as while total income in the sector has grown by 30% since 2001, for those who reached 65 in that year, it had only increased by 7% to 2014.
The biggest drivers of wealth growth for new senior citizens were occupational pensions, which account for over a third of gross pensioner income growth since 2001.
A quarter of pension income growth since 2000 is accounted for by employment, with the proportion of senior households in which at least one person works growing from one in eight in 2001 to nearly one in five.
Another quarter of income growth is down to pensioner benefits growing by 8% since 2001.
Housing has also been a major factor with 73% of pensioners now owning their own homes, up form 64% in 2001.
However, the report shows a sharp divide in wealth levels among pensioners.
The top fifth of pensioner households account for 74% of employment income, 66% of investment income, and 52% of occupational pension income.
In contrast, the poorest fifth of households are almost entirely reliant on benefit income.
The study warns that with falling home ownership levels for millennials, low generational income growth and less access to defined benefit pension schemes, it cannot be assumed the trend in richer seniors will continue.
Adam Corlett, economic analyst at the Resolution Foundation, said: “One of the most intriguing aspects of the recent living standards story across Britain has been typical pensioner household incomes overtaking working age households for the first time.
“This has led some to assume that all pensioners are enjoying some kind of boom amid the painful squeeze for everyone else. The reality is quite different - the incomes of individual pensioners grow relatively slowly, particularly once they’ve stopped working.
“Instead, the main driver of pensioner income growth has been the arrival of successive new waves of pensioners, who are more likely to work, own their home and have generous private pension wealth than any previous generation.
“Of course, not all pensioners can draw on these income sources, which is why the state pension will always be the main income for many pensioners. We can’t assume either that young people today will be able to draw upon the kind of wealth that recent pensioners have accumulated, given the recent fall in home ownership and decline in generous defined benefit schemes.
“The big challenge we face as a society is to ensure that the record incomes that a new generation of pensioners are enjoying are not a one-off gift, and can endure for future generations too.”