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The Actuary The magazine of the Institute & Faculty of Actuaries

Retirement income almost triples in 40 years

The average annual income for pensioner households in real terms was £29,000 last year – almost three times the £10,500 it was back in 1977.

Retirement incomes rising faster than for workers ©Shutterstock

That is according to new figures from the Office for National Statistics, which show that over half the rise in income can be attributed to a near sevenfold increase in private pensions.

This is reflected in 96% of retired households having an annual disposable income of over £10,000 in 2016, compared with just 21% 40 years ago.

“The growth in the average annual disposable income of retired households, over the last 40 years is impressively large,” Barnett Waddingham consultant, Malcolm McLean said.

“This shows the value of making private pension provision and not relying on the state pension alone, however, there is still much to do to maintain progress, and avoid slipping backwards, in relation to retired household incomes.”

The near tripling in income of retired people is significantly more than the growth experienced by people still working, who have seen their incomes slightly more than double since 1977.

Although more people are receiving private pensions, and greater amounts, income from the state pension has also increased, almost doubling over the last 40 years, with the effect of the triple lock maintaining growth.

It was also found that retired households in receipt of a private pension had disposable incomes that were 1.6 times higher than households that were not last year.

This inequality between retired households in relation to income was observed to have increased in recent years, although is still relatively low compared to the 1980s.

“There has to be a concern about the levels of income inequality that exist between individual households, particularly so in a comparison between ‘the haves and the have nots’ when it comes to pension provision being made,” McLean said.

“It is important that today’s workers take advantage of being auto-enrolled into a workplace pension scheme and start saving at the earliest possible ages, and as a matter of urgency, we must continue to strive to find a way to bring the self-employed into the process.

“If the pensioners of tomorrow are to going to catch up with, and at least match, those of today there can be no room for complacency in addressing these issues.”

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