The Pensioners’ Income Series published annually by the Department for Work and Pensions (DWP) contains information on the sources and distribution of pensioners’ household income, used to inform government policies on topics such as ageing and the distribution of wealth.
Analysis of pensioner income shows the net average weekly income (after income tax, NI and council tax) of recently retired pensioner households is £392 whereas the net average weekly income of non-recently retired pensioner households is £326. This represents a 20% difference between the two groups. The main driving force behind the difference is from earnings income. Over a quarter (26%) of recent retiree income is from earnings compared to just 13% for older pensioners. This suggests recent retirees are taking a phased approach as they transition from work into retirement.
The data also highlights an unequal distribution in income between pensioner age groups. Just 13% of pensioner couples where the head is over 75s have an income in the top fifth of the pensioner net income distribution compared to nearly a quarter (23%) of pensioner couples where the head is under 75.
The figures are based on average (median) incomes and there will be many retirees with incomes substantially below these figures.
Steven Cameron, Pensions Director at Aegon, comments: “The Government figures show that older pensioner households are lagging behind recent retirees when it comes to their income. Changing retirement patterns could be a reason for this as many people are now adopting a transitional approach to retirement by continuing in employment after traditional retirement ages, while reducing their working hours over a period of time rather than a ‘cliff edge’ approach.
“The figures show that since 1995, earnings income for new retirees has more than doubled from an average of £64 to £168 per week on top of personal and state pension incomes.
“For individuals in the early stages of retirement, many of who are in the Baby Boomer generation, pensioner poverty generally is at an all-time low, but as these figures are based on average (median) incomes, it must be remembered that there are many retirees with incomes substantially below the average figures.
“The retirement income of the post-war generation has been boosted by favourable economic conditions. Many but by no means all retirees will also be benefiting from generous defined benefit pensions, but this feature will tail off for future retirees, making it unlikely that each future wave of newly retired will have average incomes higher than the previous one.
“Policymakers need to ensure they look at the changing income profiles of pensioners to understand the distribution of wealth across this large and growing proportion of the population. Adopting a ‘one-size fits all’ approach would be dangerous and risks overlooking what can be significantly different financial challenges facing pensioner groups of different ages and wealth.”
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