A report from the Resolution Foundation released earlier this year found that the typical income of a pensioner, after housing costs have been deducted, are now higher than the incomes of working age people.
The findings suggest that pensioner households are £20 a week better off than households of those who are working age. This is a big reversal in fortune as in 2001, pensioner households were £70 worse off a week. This growth in the incomes of pensioners comes at a time when there has been weak growth in incomes for those who are of working age.
Adam Corlett, economic analyst at the Resolution Foundation, thinks that the main reason for this big change in pensioner income is as a result of a growth in the number of pensioners in the UK, many of whom are still in work.
Alongside a growth in employment, there are more pensioners who own their own homes, a greater ownership of generous private pensions and an increase in pensioner benefits such as a protected state pension, winter fuel allowance and free TV licences.
However, he warns that this may also be the last time we see these sort of figures as the younger generation are unlikely to have these sort of benefits; “We can’t assume either that young people today will be able to draw upon the kind of wealth that recent pensioners have accumulated, given the recent fall in home ownership and decline in generous defined benefit schemes.”
As a result of these findings, executive chair of the Resolution Foundation and former Conservative minister, Lord David Willetts, thinks the pension ‘triple-lock’ needs to be reviewed. As part of the government’s triple-lock guarantee every year pensions will rise by the same as average earnings, the consumer price index or 2.5%, whichever is the highest percentage of the three.
As average earnings are rising by 1-1.5% currently and have done for a few years now, pensions are rising by at least 1-1.5% more year on year than earnings. As a result, pensions are being pushed up at a time when working incomes for many means they are part of the just about managing (JAM) group.
Lord Willetts points out that even though pensioners are happier due to being better off, they are concerned about future generations; “I actually think pensioners worry about their kids and grandchildren. They don’t want to live in a society where all the big increases in incomes are accruing to pensioners and other groups are being left behind.”
Now that things have changed for the better for the nation’s pensioners, Lord Willetts says the government’s focus should switch to young people. He feels that they need to look at ways of improving their pension rights, chances of owning a home and job prospects/annual earnings.
He said that “these are all things that have enabled today’s pensioners to be so prosperous,” and many feel that it is only fair the younger generations have the same opportunities as the generations before them.