Typical pensioner households are now £20 a week better off than typical working age households, according to a report by the think tank the Resolution Foundation.
It says strong recent growth in typical pensioner incomes has been driven by new cohorts of pensioners who are more likely than their predecessors to still be in work, own a home and have access to generous private pension pots.
The report, As Time Goes By, tracks the scale of income growth across different generations over the last 50 years.
It says strong growth in pensioner incomes – coupled with weak income growth for working age households – has driven a huge change in living standards across Britain. It adds that typical pensioner households are now £20 a week better off than typical working age households (after housing costs), while back in 2001 typical pensioner incomes were £70 a week lower than working age incomes.
However, this strong growth has not affected all pensioners. While typical incomes across the pensioner population have grown by over 30 per cent since 2001, the typical income of someone who turned 65 in that year was only 7 per cent higher by 2014, it says.
Instead, record pensioner incomes are a product of the arrival of successive waves of better-off pensioners. Four key drivers are occupational pensions, post-retirement employment, benefit increases and home ownership. The wealthiest pensioners have done the best from these trends, says the report. The top fifth of pensioner households account for 74 per cent of all employment income, 66 per cent of investment income and 52 of occupational pension income. In contrast, the poorest fifth of households are almost entirely reliant on benefit income.
The Foundation warns that future generations of pensioners cannot assume that they will benefit from further gains from these income sources, particularly with home ownership falling and millennials seeing no generational income growth from their predecessors.
It says they will also be less likely to have access to defined benefit pension schemes, with the scale of private pension income for future generations being dependent on the continued success of auto-enrolment in driving up occupational pension saving.
It says that tackling these challenges – as well as making further progress on helping more people to stay in work as they get older – will hold the key to ensuring that today’s workers enjoy the same remarkable generation-on-generation improvements in living standards that recent waves of pensioners have achieved.
Adam Corlett, Economic Analyst at the Resolution Foundation, said: “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.”