Facing an retirement

THE gap in disposable income between the best and least well off retirees is growing.

While income inequality is broadly stable for those in work, the gap is now at a record level for those who have retired, according to figures from the Office for National Statistics.

The Gini coefficient is used to measure this inequality - it is shown as a percentage between 0% (where everyone's income is the same) and 100% (where one person gets everything).

For retired households in the UK, it stood at 31.7% in 2019/20, up from 31.6% the year before.

After dropping following the financial crisis, the gap has been growing in recent years - it's now the highest it's been since 1977 (although the method of calculating has been adjusted over the years).

A retired household is one where more than half of the income comes from someone who describes themselves as retired, or from someone over the state pension age who is not looking for work.

Dr Wanda Wyporska, Executive Director, The Equality Trust said: "After generations of damagingly high levels of inequality, we see this played out in retirement, even more so than in the workplace.

“We have known that low wages for women have resulted in low pensions and that women are more likely to suffer from poverty during retirement. As we are forced to work for longer, yet facing a looming recession, the growing gap in pensioners' disposable income will undoubtedly see more of our older population ending their lives in poverty.

“This ought to be a warning sign for future generations, low incomes produce low pensions.”

The average disposable income for a retired person was £25,434 in 2019/20, while non-retired people had a disposable income of £32,141.

Income inequality for nonretired households is higher than for retired ones, but more stable.

In 2019/20, the Gini coefficient for this group was 34.9%, down from 35.0% in 2018/19, putting it at the same level as in 2017/18.

The Gini coefficient across all households has been broadly stable over the past ten years with disposable income reaching 34.6% in 2019/20 after peaking at 38.6% in 2007/08 just prior to the economic downturn.

However, it is still 6.1 percentage points higher than average levels throughout the late 1970s and 1980s.

More recently, overall measures of inequality show a slight increase in income inequality since 2016/17.

The Gini coefficient has increased from 33.4% to 34.6%, while the ratio of income going to the richest 20% compared to poorest has grown 5.2 times to 6.1.

This mainly reflects a fall in disposable income for the poorest 20% of people between 2017/18 and 2018/19.