Pensioners ‘are now earning more than those still in work’

PENSIONERS are wealthier than ever as weekly retirement incomes exceed the average income of the working-age population for the first time, it was claimed yesterday.

Two in five people retiring today will be better off than they were during their working life, according to the Institute for Fiscal Studies.

Statistics revealed by the IFS last night showed pensioners’ average net income is 3 per cent higher than that of the working-age population. House prices have also contributed to the generational gap, with older people more likely to have paid off their mortgage and have no housing costs, while younger people will spend longer paying off larger mortgages.

People retiring now are also more likely to have seen better rates of return on savings and investments, which may have bolstered their pension pots.

As a result, pensioners are now less likely to be poor than working families, while 30 years ago they were at least three times as likely to be poor.

Rising incomes for current retirees have partly been caused by generous occupational pension schemes, which are increasingly unavailable to younger people, and the Government’s ‘triplelock’ on state pensions.

Under the lock, state pensions go up by whichever is the highest of inflation, earnings growth or 2.5 per cent. The IFS said the scheme ‘needs to end’ before it becomes unsustainable.

But the IFS warned: ‘It is unlikely that later generations will do as well. Future state pensions will be less generous on average, there has been an extraordinary fall in rates of home ownership, and, in the pri- vate sector, a collapse in membership of defined benefit occupational pension schemes.’

IFS researchers compared weekly incomes adjusted for household size and number of dependants for pensioners and non-pensioners. They removed housing costs, where they were paid, to give a net income for comparison.

IFS director Paul Johnson said yesterday that change to the pension system is needed to avoid younger generations facing a poorer retirement.

Speaking at the Pensions Management Institute annual lecture, he called for an end to the ‘triple-lock’, saying the system was ‘prohibitively expensive’ and injects ‘a bizarre degree of randomness’ into future levels of state pensions.

The IFS also insisted that further increases in pension age – already expected to rise to 69 by the 2040s – are likely to be ‘vital to the sustainability of the system’.

Mr Johnson said: ‘we have achieved an astonishing turnaround in the incomes of pensioners over the last three decades … But the longer-term future looks very uncertain. Those now in their 20s, 30s and 40s may well end up with lower incomes in retirement than their parents.’

Ashley Seager, of the Intergenerational Foundation charity, said: ‘The older generation is enriching itself at the expense of younger and future generations. This is neither sustainable nor fair.’

Representatives of older people said rising care costs meant financial problems for an ageing population were increasing despite income rises.

Ben Franklin, of the International Longevity Centre UK, said: ‘There remain many very vulnerable older people who live anything but a rich and fulfilling life.’

‘The future looks very uncertain’