The top 10 percent of retired households now receive 27 times more gross income from private pensions than the bottom 10 percent, according to analysis from Aviva.
The findings, which are based on data published yesterday (10 January) by the Office for National Statistics (ONS), show the top tier receives £39,507 per year in income from private pensions, compared to just £1,449 received by the bottom 10 per cent.
While income inequality among the non-retired has fallen since 2010, income inequality among the retired has been on the rise.
Disposable income in retired households was 28 per cent in the financial year ending 2017, compared with 32.5 per cent for non-retired households.
This rise in inequality has been attributed to a growing gap between those in receipt of income from private pensions and those without private pensions, the ONS said.
Nevertheless, the data shows that median disposable household income in retirement is at a record high of £22,300 per year.
Much of this growth is being driven by private pensions, which now represent the number one source of income for the average household – 44.3 per cent of average gross income.
The state pension is the second largest source of average income in retirement, 36.8 per cent of average, while the remaining 18.9 per cent is sourced from employment, other investments and other state benefits.
According to Alistair McQueen, head of savings & retirement at Aviva, the new record high shouldn’t “cloud the underlying population of haves and have-nots”.
He said: “It would be very misguided to present today’s baby-boomers as a generation of rich retirees.”
Besides underlying the importance of saving into a private pension, ONS figures also highlight “the increasing importance of considering all assets when preparing for retirement,” Mr McQueen argued.
He said: “For many, property is becoming a means of supporting their retirement.”
Around 31,000 households used equity release to unlock housing wealth in the first half of 2017, according to figures from the Equity Release Council, he added.
According to Stephen Lowe, group communications director at retirement provider Just Group, ONS figures “show that the oft-painted rosy picture of life for retired households is not consistent with reality”.
He said: “Retired households have seen their median disposable income grow at a far slower rate than non-retired households while the poorest retired households are still heavily reliant on the state.”
The ONS data shows that the poorest retired households remain heavily reliant on state support, with the lowest quintile receiving 77 per cent of their disposable income from cash benefits, compared to an average of 45 per cent for all retired households, Just said.
Research also published today by the Pensions Policy Institute (PPI) revealed that the poorest pensioners are relying on the state pension for three quarters (78 per cent) of their income.
From next April, the rate of the state pension for new pensioners will increase in line with inflation by £4.80 from £159.55 to £164.35 per week.