Retirement Income 

Over 60s earning 'more than ever'

Over 60s earning 'more than ever'

Individuals in their 60s are earning more than ever with employment rates and generous pension pots boosting incomes, according to the Institute for Fiscal Studies (IFS).

Middle-income 60 to 74 year olds have incomes more than 60 per cent higher than in the mid-1990s, with earned income rising by 160 per cent for this group as a whole, according to the IFS.

And employment rates for older men and women are expected to continue to increase as life expectancy increases and subsequent generations have less generous pensions to rely on.

But this may not be sustainable as the state pension age continues to rise, according to the IFS, which believes that policymakers ought to be doing more to support those who are unable to respond to a rising state pension age by retiring later.

At an event on the future income of retirement to be held tonight (June 25), Carl Emmerson, deputy director of the IFS, is expected to reveal that the gap in basic benefit levels for those just below and just above the state pension age has risen from 30 per cent to nearly 130 per cent in the past 20 years. 

In 1990 the equivalent to pension credit (the main means-tested benefit for pensioners) was worth 30 per cent more per week than the equivalent to jobseeker’s allowance (the out-of-work benefit for the unemployed) whereas that gap has now grown to 129 per cent, according to the IFS.

Mr Emmerson will say at the event: "Pushing up the state pension age as longevity increases makes sense. But there is a large – and growing – difference in support that the state makes available to low income households who are just below the state pension age and those who are just above it. 

"Such a big gap may look problematic in the context of a rising state pension age."

Rising life expectancy means that men now approaching 50 can expect to receive a state pension for ten years longer than they would have done in the 1950s. 

A 50 year old man in 1950 would, on average, have lived to age 73 giving him eight years of state pension receipt from the then state pension age of 65. 

A man now approaching 50 might have to wait until 68 before receiving a state pension, but can expect to do so for 18 years as male life expectancy at age 50 has now risen to 86.

In comparison, a 50 year old woman in 1950 would, on average, have lived to age 79, giving her 19 years of state pension receipt from the then state pension age of 60. 

A woman now approaching 50 might have to wait until 68 before receiving a state pension, but can expect to do so for 20 years as female life expectancy at age 50 has now risen to age 88.

According to the IFS, since the mid-1990s there has been strong growth in the incomes of middle income 60 to 74 year olds (averaging 2.2 per cent per year). 

This reflects growth in state pension incomes (1.2 per cent), stronger growth in private pension incomes (3.0 per cent), and even stronger growth in earned income (4.3 per cent).