Pensioner incomes beating working age households

13 February 2017

Retired households now have a higher weekly income than their working-age counterparts, according to a new study from the Resolution Foundation.

The think tank found that pensioner households are typically £20 a week better off than those who are still in work. This compares to 2001 when they had £70 less to live off a week than working-age households.

However, the Resolution Foundation was quick to stress that it has not been “boom time” for all pensioners. Although average pensioner incomes have risen by 30% since 2001, the income of somebody that turned 65 in that year was only 7% higher by 2014. Instead the shift has been driven by successive waves of new, wealthier retirees.


The Resolution Foundation singles out four key factors that have increased the wealth of new retirees:

  • Occupational pensions: This is the biggest single source of rising pensioner income, accounting for more than a third of gross pensioner income growth since 2001.
  • Employment: The number of pensioner households where at least one remains in some form of paid work has risen from one in eight in 2001 to a current level of one in five. This accounts for a quarter of pensioner income growth.
  • Benefits: A further quarter of pensioner income growth comes from benefit income, which has risen by 8% since 2001.
  • Housing: A continuing move from rented accommodation to homeownership has reduced pensioners’ housing costs and increased levels of disposable income. Resolution says 73% of pensioners now own their own home, compared to 64% in 2001. Over the same period the number of pensioners living in the social rented sector fell from 22% to 14%.


Growth in private pension income and work earnings has been particularly significant for the wealthiest retirees. The Resolution Foundation claims the richest 20% of pensioners account for 74% of employment income, 66% of investment income and 52% of occupational pension income.


Future pensioners may not be so lucky

However, The Resolution Foundation warns that future pensioners may not be so lucky, with fewer people having defined benefit pensions and levels of home ownership falling.

Commenting on the report, Adam Corlett, economic analyst at the Resolution Foundation, says: “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.”

He adds: “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.”


Jon Greer, pensions expert at Old Mutual Wealth says the findings of the report could increase tension between younger and older generations. He says: “The report further substantiates feelings of intergenerational unfairness that have become an increasingly tense point. The reasons are complex, but things that may have been taken as fairly straightforward by previous generations: owning your own home and building up a funded pension, are now much more challenging for younger generations today.”

Research from Old Mutual Wealth shows that 22% of people aged between 30 and 45 have less than £100 in non-pension savings and that a lack of disposable income is the key barrier to saving. Almost 80% of those that weren’t saving said it was because they did not have the money to spare.

Mr Greer adds: “The report gives government further cause for thought to pursue a policy agenda focused on rebalancing the intergenerational contract. The most obvious target is the state pension triple lock which was introduced to remove pension poverty and it has been successful in that endeavour. Now that the relative decline in the State Pension has reversed, the triple-lock should be reviewed from 2020 and replaced with an earnings link.
The government should also consider future policy on universal pensioner benefits. Targeting these benefits more efficiently to those that most need help could allow policymakers to help younger generations.”

Add new comment