Average retiree income surges 13%

Average retiree income surges 13%

The average disposable income of retired households has risen 13 per cent since the 2008 crisis, a period in which non-retired household income fell, new figures from the Office of National Statistics have revealed.

In the 2007/08 financial year, the average disposable income of a retired household stood at £19,262. Today it stands at £21,770.

A non-retired household, meanwhile, received a disposable income of £28,817 in 2008, compared with £28,481 today. That represented a 1.2 per cent fall.

The ONS put this disparity down to two main factors: a rise in retirement income through private means; and the triple lock guarantee on annual increases to the state pension.

Introduced in 2010, the triple lock guarantees the state pension will rise with the highest of inflation, earnings, or 2.5 per cent.

The ONS found that over the period, average income from private pensions went from £7,734 in 2007/08 to £10,967 in 2015/16.

That was more than the £9, 289 that was derived from the state pension in 20015/16.

The figures show private pensions and annuities took over as the main source of income for retired households in 2010/11. 

The ONS put the fall in income for those of working age down simply to a fall in income from employment.

Steven Cameron, pensions director at Aegon UK, agreed with the ONS that increased income - largely through defined benefit pensions - and the triple lock were behind the discrepancy.

However, he warned that, with the winding down of DB schemes along with hints that the government may scrap the triple lock, retirees would not be so well-off in the future

“While auto-enrolment and the growth of defined contribution schemes go some way to offsetting the decline of DB, policy makers need to recognise that future pensioners may not be as well off as those today and this should be recognised, particularly when thinking about the future of the state pension,” he said.

Alistair McQueen, head of savings and retirement at Aviva, described the ONS report as "a tale of the haves and haves not", and would put pressure on the triple lock.

“Rising incomes in retirement is a good thing, however the divergent experiences of the retired and non-retired will place increasing political pressure on the state pension triple lock," he said.

"Government policy is beyond an individual’s control, but private planning is not. It is therefore increasingly important for people to take control of their own retirement planning."

The government has committed to keeping the triple lock in place until 2020, and has given no clear indication of what it will do after that.