“New Pensioners Incomes Series data from the Department for Work and Pensions (DWP) show average income for pensioners after housing costs fell from £376 a week in FYE 2021 to £349 in FYE 2022 – a drop of £27 per week, or £1404 a year.
“While the DWP highlights that some of this difference may be as a result of the more limited and therefore less representative 2021 pensioner sample caused by the coronavirus pandemic, there were certainly other factors at play that contributed towards this shift in pensioner income.
“97% of all pensioners were in receipt of the state pension in 2022, so even within the context of the skewed 2021 dataset, we know that the below-inflation uprating of the state pension in 2022 will have had a real impact on average pensioner income and their subsequent spending power.
“This lower uplift was felt even more keenly by female pensioners, who on average were more heavily reliant on benefit income – that includes the state pension – than male counterparts. In FYE 2022, benefit income made up 60% of total gross income for single female pensioners, compared to just 48% for single males. What’s more, single female pensioners’ overall average income was materially lower, at just £232 per week compared to £254 for single males. Pensioner couples were on average better off, earning £515 per week – more than double that of single pensioners who had an average income of £239.
“While the state pension may not have received quite the boost many retirees would have hoped for, the data still show a trend of significantly improving pensioner incomes. In 2022, 50% of pensioners were in the top half of the overall population income distribution – up from 38% of pensioners in 1995. For pensioner couples, this figure rose to 54%, up from 44% in 1995. What’s more, the number of pensioners in the bottom two fifths of overall population income have fallen significantly since 1995, while those in the top three fifths have risen.
“When you consider the relative position of pensioners to others in terms of improving incomes, at first glance it may appear that those of working age have simply suffered a much slower increase in pay. However, such an increase in the number of pensioners being among the top half of overall income distribution may also suggest that more people have benefited from pension savings during their working lives and are reaping the rewards as a result.
“These latest figures reiterate the real need for people to save for their retirement and the importance of not solely relying on the state pension to meet your spending needs in later life. With the cost-of-living crisis continuing to put pressure on our everyday finances, it is vital that people do not put a hold on saving for their retirement if possible.
“The Chancellor’s spring budget unveiled an overhaul on pensions that could help boost your retirement pot. While not everyone will be able to make full use of the increased annual allowance, it is important that people prioritise pension savings and appreciate just how much of a difference it will make to their financial wellbeing in later life.
“What’s more, while it should not be solely relied on, the data show just how important the state pension is to the average pensioner’s income. The government recently extended the deadline for people to make voluntary National Insurance contributions and top up their state pension by three months to 31 July, meaning people have a fantastic opportunity to boost their retirement income where suitable.”
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