Income of poorer households near retirement ‘falling behind that of pensioners’

The incomes of poorer households where people are approaching state pension age have increasingly lagged behind those of less wealthy pensioners over the past 20 years, according to the Institute for Fiscal Studies (IFS).

Government policies have become more generous to those on low incomes who have reached state pension age, when compared with those who are still approaching it, the IFS said.

The growing income gap could become more of a problem as people generally are expected to have longer working lives and the state pension age increases, according to the IFS.

The IFS is to highlight the issue at an “IFS at 50” anniversary talk given on Tuesday by its deputy director Carl Emmerson.

In 1999 the poorest fifth of the population aged up to five years above the state pension age had an average income 17% higher than those in the poorest fifth who were due to reach state pension age within the next five years, the IFS said.

By 2017 the gap had grown much wider, with the poorest fifth of people aged up to five years above state pension age having an income 70% higher typically than the poorest fifth who were within five years of reaching state pension age.

The research also found that 60 to 74-year-olds on middle incomes have total incomes more than 60% higher than their predecessors in the mid-1990s, as private pensions and earnings have grown.

The IFS said employment rates for older men and women are likely to continue rising as life expectancy increases and future generations have less generous pensions to rely on.

Mr Emmerson was due to say at the talk: “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.”