‘Golden era’ for millions of pensioners as incomes triple
PENSIONERS have “never had it so good” with their incomes almost tripling over the last 40 years, according to official figures.
The UK’s retirees enjoyed a golden era as average pensions soared from £10,500 in 1977 to £29,000 in 2016.
In 1977, 21 per cent of retired households had an annual disposable income of over £10,000 after accounting for inflation.
But last year this had surged to 96 per cent.
Over the same period the gross income for working households only doubled from £20,200 to £41,900, according to the Office for National Statistics.
The number of retired households enjoying very high incomes has also jumped. In 1977, just one in 500 pensioners had an income of £40,000 a year or more (in today’s money) but now one in 10 receives a pension of this amount or more.
And between 1977 and the financial year ending April 2016, disposable income of pensioners has on average risen by 2.8 per cent a year in real terms, compared to 2.1 per cent for working households.
“Pensioners have never had it so good,” said David Newman, head of pensions at asset managers Close Brothers.
“Gold-plated final salary pensions have been instrumental in boosting incomes over the past 40 years, while the income provided by the state pension has doubled over the period, with the ‘triple lock’ maintaining growth more recently.”
Behind the income growth was a steep rise in private pensions which increased seven-fold over the period. The state pension has also doubled in value in real terms, rising from £5,600 in 1977 to £11,000 in 2016.
However, retired workers relying on a state pension have fared much worse than those with private schemes with inequality between rich and poor pensioners widening since 1977.
Much of the growth in private pensions has come from company schemes that have paid out as much as two-thirds of an employee’s final income at retirement. But most of these schemes have now closed in the private sector, leaving today’s workers dependent on lower paying stockmarket-based schemes.
Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, said: “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. Whilst 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.”
Tom Selby, a senior analyst at AJ Bell, said the figures are “a stark reminder of the impact failing to save for retirement can have and savers need responsibility shoulders”.
“Making just the minimum pension contributions is not enough to cover most people’s costs and this will particularly be the case for those who still have a mortgage to pay off in retirement or need to pay for long-term care,” he added.
Steven Cameron, pensions director at Aegon, said: “With a rising state pension age and an ageing population we’re likely to see yet further individual responsibility given to people, to support themselves in their old age.
“For younger generations, the message is clear – get into the savings habit as early as possible in your career.” to is realise firmly that the on their