Pensioner household incomes overtake those of working age - study

Pensioner household incomes have overtaken those of working age equivalents for the first time, a new study found.

Elderly spending power has been boosted by a new wave of pensioners who tend to still be in work, own a home and receive generous pension pots, analysis by the Resolution Foundation for the Intergenerational Commission shows.

The As Time Goes By study, which charts income changes across different generations during the past half century, states low growth for working age households has coincided with a surge in pensioner wealth.

After housing costs, typical pensioner households are now £20 a week better off than typical working age ones, according to the report.

This is in marked contrast to 2001 when typical pensioner incomes were £70 a week lower than working age ones.

The growth appears to have come from the recent cohort of pensioners, as while total income in the sector has grown by 30% since 2001, for those who reached 65 in that year, it had only increased by 7% to 2014.

The biggest drivers of wealth growth for new senior citizens were occupational pensions, which account for over a third of gross pensioner income growth since 2001.

A quarter of pension income growth since 2000 is accounted for by employment, with the proportion of senior households in which at least one person works growing from one in eight in 2001 to nearly one in five.

Another quarter of income growth is down to pensioner benefits growing by 8% since 2001.

Housing has also been a major factor with 73% of pensioners now owning their own homes, up form 64% in 2001.

However, the report shows a sharp divide in wealth levels among pensioners.

The top fifth of pensioner households account for 74% of employment income, 66% of investment income, and 52% of occupational pension income.

In contrast, the poorest fifth of households are almost entirely reliant on benefit income.

The study warns that with falling home ownership levels for millennials, low generational income growth and less access to defined benefit pension schemes, it cannot be assumed the trend in richer seniors will continue.

Adam Corlett, economic analyst at the Resolution Foundation, said: "One of the most intriguing aspects of the recent living standards story across Britain has been typical pensioner household incomes overtaking working age households for the first time.

"This has led some to assume that all pensioners are enjoying some kind of boom amid the painful squeeze for everyone else. The reality is quite different - the incomes of individual pensioners grow relatively slowly, particularly once they've stopped working.

"Instead, the main driver of pensioner income growth has been the arrival of successive new waves of pensioners, who are more likely to work, own their home and have generous private pension wealth than any previous generation.

"Of course, not all pensioners can draw on these income sources, which is why the state pension will always be the main income for many pensioners. 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.

"The big challenge we face as a society is to ensure that the record incomes that a new generation of pensioners are enjoying are not a one-off gift, and can endure for future generations too."

How we spend our pensions
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How we spend our pensions

Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.

A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.

Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.

Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.

Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.

A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement

Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.

Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.

Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.

The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.

While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.

Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to - because while baby boomers know how to have fun - they also know how to save for the future.


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