For the first time pensioner household incomes have grown greater than those of working age equivalents, a new study has found.
Elderly spending power has received a boost as today’s pensioner tend to be home owners, are still in work, and receive generous pensions, according to the Resolution Foundation for the Intergenerational Commission.
The Foundation conducted The As Time Goes By study, charting income changes across different generations during the past half century. The results show that a lack of growth for working age households has also coincided with an increase in the wealth of today’s pensioners.
After housing costs, the average pensioner household is £20 a week better off than typical working age ones, according to the report.
This is in stark contrast to 2001 when the average pensioner income was approximately £70 a week lower than the working age average.
According to the study, the most recent demographic of pensioners may be the cause behind the growth. Although the total income in the sector has grown by 30% since 2001, for those who reached 65 in that year, it had only increased by 7% to 2014.
Occupational pensions appear to be the biggest catalyst for growth in wealth for elderly Brits. These account for over a third of gross pensioner income growth since 2001.
Since 2000, employment now accounts for a quarter of pension income growth, and in 2017 nearly one in five residents within a senior household works, compared to one in eight in 2001.
However, the report also displays a marked divide in the distribution of wealth among pensioners. The top fifth of pensioner households now account for:
- 74% of employment income
- 66% of investment income
- 52% of occupational pension income
Meanwhile, the poorest fifth of households are almost completely reliant on income derived from benefits.
The study also warns that with the decreasing home ownership levels for millennials, low generational income growth and less access to defined benefit pension schemes, assumptions cannot be made that the trend in wealthier seniors will continue into future generations.
Adam Corlett, is economic analyst at the Resolution Foundation. Of the sudden boom in pensioner wealth he said: “[It] 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.”
“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.”