Baby boomers earning more than ever
This age group have total incomes more than 60 per cent higher than the similar group in the mid-1990s, with earned income rising by 160 per cent for this group as a whole.
The IFS said employment rates for older men and women are likely to continue rising as life expectancy increases and subsequent generations have less generous pensions to rely on.
The research also found the gap in basic benefit levels for those just below and just above the state pension age has risen from 30 per cent to nearly 130 per cent in the past 20 years. This may not be sustainable as the state pension age continues to rise.
Carl Emmerson, deputy director of the IFS, is speaking about ‘The Future of Income in Retirement’ at the third ‘IFS at 50’ anniversary talk tonight.
He said: “The incomes of middle income 60 to 74-year-olds are now much higher than they were in the mid-1990s as private pensions and earnings have grown. Future generations may actually end up with lower private pensions. But there is much capacity for employment rates of older individuals to rise further: for example employment rates of men aged 60 to 64, which have been increasing since the mid-1990s, are still well below the rates seen in the 1970s when life expectancy was much lower and health less good.
“Pushing up the state pension age as longevity increases makes sense. But there is a large – and growing – difference in support that the state makes available to low income households who are just below the state pension age and those who are just above it. Such a big gap may look problematic in the context of a rising state pension age.”
IFS research found that rising longevity means men now approaching 50 can expect to receive a state pension for 10 years more than they would have done in the 1950s.
A 50-year-old man in 1950 would, on average, have lived to age 73 giving him eight years of state pension receipt from the then state pension age of 65. A man now approaching 50 might have to wait until 68 before receiving a state pension, but can expect to do so for 18 years as male life expectancy at age 50 has now risen to 86.
A 50-year-old woman in 1950 would, on average, have lived to age 79 giving her 19 years of state pension receipt from the then state pension age of 60. A woman now approaching 50 might have to wait until 68 before receiving a state pension, but can expect to do so for 20 years as female life expectancy at age 50 has now risen to age 88.
The IFS also found that pensioners now have income (after housing costs) on average similar to those of non-pensioners after more than 20 years of faster income growth. They are now less likely to be poor than younger people.
Since the mid-1990s there has been strong growth in the incomes of middle income 60 to 74-year-olds (averaging 2.2 per cent per year). This reflects growth in state pension incomes (1.2 per cent), stronger growth in private pension incomes (3 per cent), and even stronger growth in earned income (4.3 per cent).