Baby boomers in the UK are enjoying a far more prosperous retirement than previous generations, and they have pensions to thank for that, according to a new report from the UK’s Office for National Statistics (ONS).
According to the report, “What Has Happened to the Income of Retired Households in the UK Over the Past 40 Years?,” the majority of the income of retired households comes from state and private pensions, and more than half of the increase between 1977 and 2016 can be attributed to increased private pension income alone. Since 1977, private pension income has increased nearly sevenfold, from £1,800 to £12,400.
The report attributes the sharp rise in private pension income to an increase in the proportion of households receiving private pension income, and increases in the amount they receive. It also found that income from state pensions has increased, however at a slower rate than private pensions, rising from £5,600 in 1977 to £11,000 in 2016.
The ONS report also found that the percentage of retired households with an annual disposable income of more than £10,000 ($13,000) has soared from 21% in 1977 to 96% in 2016.
“Since 1977, the income of retired households has grown considerably,” said the report. “Recent analysis has shown that between 1977 and financial year ending (FYE) 2016, the disposable income of retired households increased at an average annual rate of 2.8%.”
This compares to average annual growth in non-retired households of 2.1%.
However, the ONS said that despite the growth in the average disposable income of retired households, the inequality gap between retired households has widened in recent years. However, they remain small relative to increases in income inequality for retired households during the 1980s. For the fiscal year ending 2016, retired households with a private pension had disposable income that was 1.6 times higher than households that were not.
“We have seen a dramatic and necessary reduction in pensioner poverty since the 1970s,” said Anna Dixon, chief executive at the Centre for Ageing Better. “However, these averages mask inequalities. In particular, the growing disparity between those who have been able to save into a private pension and those who have not.”
The gap between the average amounts of household income for those with and without a private pension has been increasing since 1977, said the report. For the fiscal year ending 2016, those with a private pension had average original income 14 times higher than those who did not receive any private pension income, which is £19,000 compared with £1,300.
“Those without any form of private pension income are not having their incomes supplemented enough by these cash benefits amounts to reduce overall inequality in income,” said the report.