According to recent analysis, pensioners in the UK now have a higher average income than those of working age. This unexpected finding raises critical questions about potential longer-term impacts on economic development and social equity. At present, pensioners are around £20 per week better off than non-pensioner households with a member in full-time work. This trend is cause for concern due to the long-term sustainability of pensioner incomes and an increase in poverty levels for future pensioners.
Given that the average earnings of pensioner households are currently just over £20,000. More pensioners are deciding to stay in work as they claim their pensions. This trend is an important part of understanding what is going into that figure. This dual-income scenario lets them double up on their savings, increasing wealth’s barriers to entry even further. Only one member of a household needs to be over the state pension age for it to count as a pensioner household. This creates new opportunities to still earn strong wages and remain eligible for retirement benefits.
The increase in pensioner income is in part due to long-term trends. Most existing pensioners are recipients of final salary pensions, which have become increasingly less common. By the 1990s, fewer than 32% of workers participated in such pension plans. Final salary pensions are disappearing fast. This trend means that retirees in the coming decades are likely to be less financially secure than today’s pensioners.
Yet for all of the obvious wealth of today’s retirees, specialists warn that these developments can’t be maintained perpetually. There are increasing fears over pensioner poverty in the future. It’s going to take a more profound reexamination of the whole system to avoid creating this dangerous new social divide. Philip Inman, in his article, highlights that “the average income of a pensioner is higher than that of a working-age person,” but warns that without strategic planning, this situation could reverse.
Alongside the cost, another big issue is the loss of income gained through the avoidance of paying pensioner National Insurance contributions. Most older people use more National Health Service assets than any other age group. Once they retire, they do not pay into National Insurance. This leaves a large void. Some actively pay for long-term, public infrastructure and services; others receive public benefits without ever paying for them or continuing to pay for them.
The fiscal retirement experience today is in sharp contrast to that of younger generations. For example, a single pensioner might need to draw from a small private fixed pension along with a smaller state pension due to part-time employment. Consequently, they may not possess a pension that is higher than those of their working-age counterparts. That nuance is very important in understanding the whole picture of pensioner income.
Public sector employees frequently get told around pay negotiations that their lower salaries are made up for by larger retirement funds. This explanation often shapes their view of total compensation. This narrative pits newer workers against older workers, which is particularly damaging as younger employees are already experiencing wage stagnation amidst increasing costs of living.
Demographics have an enormous impact on this conversation, too. In certain Preston wards, baby boomer pensioners only live an average of 66 years. Their higher incomes today suggest that as they age, they could perhaps be more successful at dealing with the challenges that come with longevity and rising healthcare costs.
Successive governments of all political colours pursued policies of economic growth and full-employment until 1979. Those decisions powerfully influenced today’s pensioners’ incomes. Smart phone and or computer required NEW! This long-term investment in their society has played a central role in their current prosperity.
“People who have taken – and will continue to take – far more out of the system than they put in.” – Philip Inman
This note reveals an increasing concern about the long-term viability of our current welfare systems. We have more retirees with increased claims on public resources, while making disproportionate contributions. This trend is alarming enough in the short-term, but in looking forward over the next ten years the concern grows even deeper.