Pensioners' incomes rising fastest, says IFS

 

The BBC's Simon Gompertz meets the pensioners and young people 'reversing' roles

UK pensioners' incomes have risen faster than all other age groups in the last 30 years, a study has shown.

The study from the Institute for Fiscal Studies (IFS) described the trend as "a triumph of social policy", arguing that poverty in old age was being reduced.

The research also found that the over-60s are the only age group to have become better off since 2007/08.

The findings may fuel the debate over how much protection pensioners should be given from austerity measures.

'Younger' poverty

The IFS said while older people had become richer on average since the beginning of the financial crisis in 2007/08, younger people had become poorer.

The median - or middle - income of the over 60s grew by 2-3% between 2007/08 and 2011/12, continuing a long-term trend, it said.

This was primarily the result of the stability of benefits such as the state pension.

Yet, the median income of people in their 20s fell by 12% over the same period, allowing for inflation. This was the largest fall of any age group, owing to low or frozen wages and high unemployment.

"The face of poverty has become much younger during recent decades," said David Phillips, a senior research economist at the IFS.

"It is young people who have suffered most as a result of the recent recession and who are now at risk of falling further behind.

"It is important that policymakers and politicians understand these profound changes to patterns of low incomes and respond accordingly."

European comparison

In the early 1960s and early 1970s, the pensioner poverty rate was much higher than for working-age adults.

But the gap has now shrunk significantly, with many pensioners also benefiting financially from owning their own home.

Children playing football Other figures have shown that one in six UK children live in poverty

But while the IFS report suggested that pensioner incomes had risen in contrast to others, it did not say that they had become wealthy.

Pensioners were still more likely to be found in the poorer half of the population, the IFS said.

Previous research by the OECD showed that pension income is much lower in the UK than a large number of other developed nations.

Official statistics recently ranked the UK as fourth out of 27 European countries in terms of risk of the over-65s ending up in poverty.

Some pensioner benefits are aimed at assisting people to heat their home in winter. Yet, there are 2.25 million older households in fuel poverty - the equivalent of four million pensioners.

Charity Age UK said older people were more likely than other age groups to be affected by fuel poverty because of their low, fixed incomes and poorly insulated homes.

However, a spokesman for the Department for Work and Pensions (DWP) said: "This government restored the link to earnings on the state pension, and went further to introduce the triple lock, and protect a group that is less able to boost their incomes through work.

"These [IFS] statistics show that progress has been made, and the value of the basic state pension is its highest relative to earnings for 20 years."

But Michelle Mitchell, Age UK's charity director general, said: "While it is true that some older people have seen their incomes rise in recent years, there are still huge inequalities prevalent within the older generation as well as the general population as a whole."

Poverty figures

The IFS report, which was funded by the Joseph Rowntree Foundation, goes on to say that working-age adults without children are now as likely to be poor as the rest of the population.

This was the result of an increase in households where no adult is in work, as well as a fall in the relative value of out-of-work benefits.

The figures come a day after figures from the DWP showed that at least one out of every six children in the UK live in relative poverty.

In 2011/12, 2.3 million UK children (17%) lived in homes with substantially lower than average incomes.

The government said it was focussed on getting children out of poverty by getting more people into work.

 

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  • rate this
    +7

    Comment number 260.

    In 1973 I started work on £1095 a year. House prices were about £4000 or roughly 4 x annual salary. You needed a 15-20% deposit and the mortgage rate was around 12%. Single people couldn't afford a house. The majority of people live OUTSIDE London, stop basing your ways of looking at things in a London-centric manner and GET REAL>

  • rate this
    +1

    Comment number 259.

    "223.Hugo Grotius "

    The ONS say the median wage for *full-time* employees only is £506, so the median for all workers has to be less. Since there are 1.41 million (ONS) in part-time work looking for full-time work but can't get it, never mind those who are content with part-time, it's going to be a *lot* less.

  • rate this
    -2

    Comment number 258.



    So your 1st house cost approx 2/3rds your annual salary.
    If starter home now costs £150k then I presume average young persons salary is £225k? Ummmm something wrong there.....

  • rate this
    +3

    Comment number 257.

    244. fallingTP
    6 MINUTES AGO
    235. It is either arrogance or ignorance that makes us prone to anger.
    ___
    .... or it could be fear
    Something we all have to live with in uncertain times

  • rate this
    +14

    Comment number 256.

    And this has been rolled out because someone wants to start cutting benefits for the elderly, its called testing the water...

  • rate this
    +5

    Comment number 255.

    Older people may be fortunate to still hold down a job; younger people, if they can be bothered, can undertake three jobs - that is what I did when my late father died in his sleep unexpectedly leaving my mother with no income. The state pension and help for the elderly used to be miserly - it is a relief that, having paid plenty in taxes during their lives, their financial position has improved.

  • rate this
    +26

    Comment number 254.

    The reality is that pensioners haven't got richer, just that younger people havent got richer too. For several decades the young have expected that differential to rise & its not doing so.Youth unemployment was rising before the crash, & it would be more useful to understand why. At the same time jobs have declined as the population has swollen & the pursuit of the cheap has driven work abroad.

  • rate this
    +13

    Comment number 253.

    @236 But baby boomers conveniently forget this. What annoys me is the denial of how lucky they were.

    Your maths are wrong to start with!.A house may have only cost £1000 (?) but my weekly wage was about £6 for a 48 hour week. I managed...because I didn't have credit cards and I didn't have to have the latest Wi-Fi, MP3 player, branded named shoes or kids demanding everything and getting it

  • rate this
    +4

    Comment number 252.

    I wonder what odds you can get on a UK Citizen asking for political asylum somewhere "in the free world"? Surely it would have to be granted as I cannot think of many of us who are not suffering persecution and likely to be victimised if we came back to the UK!

  • rate this
    -14

    Comment number 251.

    236 Steve is right pensioners forget that the mortgages on their homes were only say 3,0000 -4,000 GBP. Plus they had no student loan debt to contend with.The Y generation will simply not be able to afford to buy a home unless mummy & daddy are daft enough to support them with cash handouts.The whole housing Ponzi scam will collapse as sales dry up,BTL have ruined everything heading fedul England.

  • rate this
    -2

    Comment number 250.

    wont be long now before pensions are hit then, has anyone considered that pensioners are better savers than the younger generations? they have had a lifetime to save up where as for us its near impossible to put savings by.

  • rate this
    +1

    Comment number 249.

    108
    --

    The DWP is talking about 300,000 children in the UK the 6th richest country in the World being in absolute poverty that is is defined as the lack of sufficient resources with which to keep body and soul together.


    If you can't understand the difference between relative poverty and absolute then I suggest you stop getting your "facts" from the Daily Mail and start using your brain.

  • rate this
    +4

    Comment number 248.

    236. steve
    5 MINUTES AGO
    Of course it is considerably easier to pay off the average mortgage on a property bought in 1960 (£1000) Than it is to pay off the average mortgage taken out in 2010 (£150,000) 150 times easier to be precise.


    Fine as long as you buy a house and never upsize or move. Most people buy several houses, at increasing prices. You're also assuming loan to value is 100%.

  • rate this
    +5

    Comment number 247.

    @236 Steve

    It's all relative my friend. I paid £11k for my first house in '78 when my salary was about £15k p.a. pre-tax. The deposit was around 15% and the mortgage rate fluctuated between 12-18%. It's like when someone says their first new car only cost them £550 back in 1960 something. In 50 years time people will probably say "My first house only cost £500k!

  • rate this
    +16

    Comment number 246.

    I am now 75,very soon, too soon 76.
    Until a few years ago I did most repairs,gardening ,painting etc.BUT, the last few years have not been kind and I have now become an employer.
    I now pay fantastic sums of money to people to do repairs etc.These they think they can turn up to when they like, as they like, and I should be honoured they have bothered with the old guy.
    MY money ain't that good.

  • rate this
    +12

    Comment number 245.

    28.Notinanutshell
    "most pensioners are actually very well off compared to society as a whole. Many perks that the well off receive need to be reviewed, they usually have no mortgages, no kids, no pension payments, etc. but receive index linked final salary pensions, etc."
    -
    Are you saying "most pensioners" are homeowners with index-linked pensions?
    Sounds a bit Kensington & Chelsea to me!

  • rate this
    +1

    Comment number 244.

    235. It is either arrogance or ignorance that makes us prone to anger.

  • rate this
    0

    Comment number 243.

  • rate this
    +3

    Comment number 242.

    @240

    Actually, the opposite will happen - you will have an ageing population with a smaller group of working age individuals. Pensions and healthcare costs will continue to rise, but income from taxes will fall.

    China's one child policy is a modern day study of this.

  • rate this
    -4

    Comment number 241.

    The over-60s are doing well. Why? In their youth, the welfare-state was smaller, requiring less taxes. Now, us "youngsters" are subsidising much of their lives. Indeed, our children will pay for today's prosperity via deficit spending, adding to our huge national debt.

    In a Ponzi Scheme, the early investors do well. The over-60s are the last of the early investors in the "welfare-state scheme".

 

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