Pensioners are now the least likely demographic group to live in poverty, according to the Institute of Fiscal Studies, as the under 30s continue to see their incomes depressed.
Just 12.1 per cent of pensioners are living below the line, according to the latest data from the IFS. In the 2014 to 2015 financial year, 12.8 per cent of pensioners were classed as living in poverty, compared to almost 50 per cent 20 years ago.
That left them better off than working age people without children - 17.8 per cent of whom live below the poverty line - and much better off than children - 27.5 per cent of whom live in poverty.
In real terms, that meant 3.7 million children were living in poverty last year, according to the IFS study.
In 1996, pensioners and children were at equal risk of living in poverty. Now there is a 15 percentage point difference between them.
The report focused on income inequality among working-age people, and did not go into great detail over why pensioners had done so much better than working people over the last decade.
However, it did point out that state benefits to pensioners had seen a huge increase since 2007, going up 8.1 per cent as a share of the UK’s total income. Income from investments and private pensions also increased by 2.9 per cent.
Meanwhile, employee income fell by 3.5 per cent, while self-employed income fell by 2.1 per cent.
The IFS also stated that pensioners, thanks to indexation of annual income increases, were not subject to income reductions.
Today’s retirees and pre-retirees fared the best in the aftermath of the 2008 global financial crisis, while the under 30s fared the worst.
“Median income for those aged 60 and over is now 11 per cent above its 2007–08 level, for 31- to 59-year-olds it has returned to its 2007–08 level, but for 22- 30-year-olds it is still 7 per cent below (despite growing by 4.5 per cent in the last two years as the labour market has recovered),” the report read.
Andrew Hood, an author of the report and research economist at the IFS said that given the economic recovery and cuts to benefits over the last few years we might have expected inequality to rise.
“But the combination of strong employment growth, some earnings growth for low-paid workers, and a lack of earnings growth for others, has kept inequality below its pre-recession level,” he noted.
Prudential’s head of business development for pensions Vince Smith-Hughes said the IFS findings confirmed Prudential’s own research, which found that people retiring in 2016 expect to receive on average an annual income of £17,700.
However, he added that debt in retirement was still a big issue, with those who still have debts owe an average of £18,800 and paying these off using income from retirement can be difficult.
“Those who are retiring in debt this year expect to take around three-and-a-half years to pay off the money they owe – and debt repayments cost them on average £224 a month.”
james.fernyhough@ft.com
