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Pensioners make hay as incomes triple in 40 years

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Retired households have tripled their incomes in the past 40 years, boosted by private and workplace pensions.

Forty years ago, the average pensioner household’s income was £10,500 (adjusted for inflation). This is just over half of the £20,200 earned by working households.

By 2016, pensioner incomes had grown to £29,500 on average, while the income for working households had risen to £41,900.

The majority of the change is attributable to a rise in personal and employer pensions. These made up just 17% of total income in 1977, compared to 42% today. However, state provision has almost doubled as well.

In spite of an increase in people working after retirement age, the average income from employment remains small. It was £166 in 1977 and is £554 today. Retirees income from other cash benefits and income is little changed over the period.

Steven Cameron, pensions director at Aegon, said: “Pensioners in the UK have never been better off financially than they are today. In the last 40 years, the average pensioner has catapulted out of the lowest income bands, and has even begun to close the gap on average incomes received by the working population.

“While this is positive news, we must be careful of complacency. A rising state pension age, the recent threat to the triple lock, and slow demise of ‘gold plated’ pensions, means that this golden age of retirement is unlikely to last for much longer. As an ageing population puts greater pressure on public services the government will look to put its finances on a stable footing, as we’ve seen with recent suggestions for social care reform. Ultimately, we’re likely to see yet further individual responsibility given to people, to support themselves in their old age.”

Steve Webb, director of policy at Royal London, said: “In previous generations being elderly was a by-word for being poor. That has changed dramatically in the last forty years with pensioner incomes nearly trebling while the incomes of the work age population rose much more slowly.   The big danger is that we are living off former glories. The big growth in pensioner incomes is driven by people retiring with good company pensions.

“But today’s workers are not building up pensions that are anywhere near as generous. While pensioner poverty rates have dropped sharply this could go into reverse if today’s workers do not build up their own pensions at a much faster rate than they are at present”.

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