Although cost rises are higher for retired households, their disposable income has grown considerably more than that of non-retired households, according to the latest Office for National Statistics data.
Pensioners have seen stronger rises in their costs than working households between 2006 and 2018, with price rises for retired households averaging 2.7 per cent per year, compared with 2.3 per cent for non-retired households.
Despite this the disposable income held by retired households has grown at a faster rate than that received by non-retired households.
Helen Morrissey, pension specialist at Royal London, said: "The statistics show the important role that private and occupational pensions have played in safeguarding the incomes of today’s retirees.
"But the decline of final salary pensions and low levels of contributions into newer pensions means the improvement in pension incomes could go into reverse without government action. This should include driving up pension contribution rates and widening the scope of the policy to include groups such as the self-employed."
From 2006 to 2018, working households have seen similar changes in their income and their household costs. Household income for non-retired households has increased by 36 per cent over this period while household costs have grown 31 per cent.
This compares to retirees’ household income increasing by 60 per cent over the same period however costs for retired households only increased by 38 per cent. ONS research had previously suggested private pensions were the main reason for the rising disposable income of retired households.
"Between 2006 and 2018 retired household incomes outplaced their cost of living by 22 per cent compared to non-retired households where the corresponding figure was only 5 per cent. It appears that the primary reason for this has been as a result of a substantial increase in private pension income in the period, a trend which has been taking place over the last 20 or more years and now seems to have accelerated," explained Malcolm McLean, senior consultant at Barnett Waddingham.
"Extremely good news for today’s pensioners but whether the picture will remain quite so rosy over the longer term is much less certain. High value final salary pensions which many pensioners now receive will not be anywhere near as widely available to future generations of retirees.
"And although auto-enrolment has brought in an estimated 10m extra pension savers since it began in 2012 the resulting individual pension income that it produces is unlikely to get anywhere near matching that of final salary recipients which it will replace."
Broadly, retired and non-retired households spend similar proportions of their money on the same categories of spending. For example, both retired and non-retired households spend the largest proportion of their expenditure on housing and housing-related services.