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Commenting on the Pensioner Income Series for 2015/16, Steve Webb, Director of Policy at Royal London said:
“These startling new figures challenge the notion that pensioners will inevitably get richer and richer. Pensioner incomes in 2015/16 were no higher than a year earlier and newly retired pensioners were actually less well off than the year before. In addition, more than half of all pensioners get the majority of their income from state pensions and benefits.
“Whilst there are clearly some pensioners who enjoy good company pensions and have benefited from house price inflation, there are clearly also many who are not in such a fortunate position. Any change to policy on state pensions need to take full account of the diversity of experience of pensioners in Britain today, and not simply assume that pensioner living standards will keep on rising.”
Steven Cameron, Pensions Director at Aegon comments: “Pensioner incomes have improved significantly in recent years, especially the proportion of income derived from workplace and private pensions. Indeed today’s retirees are set to be the wealthiest we’ve ever seen, benefiting from an era of ‘gold plated’ defined benefit pension schemes.
“While this is a positive trend, the picture is almost certain to be different for future generations as defined benefit schemes become increasingly rare and retirement income becomes more directly linked to the personal saving contributions made by the individual and their employer into ‘defined contribution’ schemes over their working life.
“It’s particularly interesting to see growing incomes for the recently retired, but this doesn’t necessarily mean their retirement pot is in better health than those that have gone before them. Retirement is becoming more of a phase, and many are choosing to continue work beyond retirement age, to supplement income from pensions.
“In this era of pension freedom and flexibility, the real challenge is determining how much money people need to save to meet their varying income needs at different stages of the retirement journey. This takes complex planning and many would benefit from seeking professional advice.”
Malcolm McLean, Senior Consultant at Barnett Waddingham, said: “Recently retired pensioners have significantly higher weekly average incomes than those who retired in 2005/06, £357 compared to £314. In 2015/16, 41 per cent of pensioners received more than 50 per cent of their gross income from private sources and more pensioners are now at the top of the income distribution rather than the bottom.
“This undoubtedly reflects the benefits of private pension saving and the opportunities that regular employment and the existence of good quality final salary schemes have provided to date for the fortunate generation involved.
“The big question is, will this trend continue or go into reverse? Especially with the demise of defined benefit provision, at least in the private sector, less secure employment and other economic pressures and uncertainties facing the country at the present time. The future of the triple lock on the state pension is another factor which could impact on pensioner incomes in the years ahead.”
Stephen Lowe, group communications director at Just, said the figures show people needing to take more responsibility for providing for themselves in retirement if they want more than a subsistence level of income.
“Nearly all pensioners (97%) are in receipt of State Pension but the percentage receiving income-related benefits has fallen to 25% in 2015/16 from 34% a decade earlier,” he said. “Over the same period, those receiving income from workplace pensions has risen to 62% from 59% and those receiving personal pension income has risen to 18% from 12%.
“Interestingly, the numbers receiving income from investments has fallen and earnings from income, although slightly higher on a decade earlier has fallen over the last five years.
“The message is that when it comes to having income in retirement to maintain a standard of living, it is the money people have put away on their own and with the help of their employer that is doing the heavy lifting.”
He suggested that people accessing pension money too early under pension flexibilities were putting their future standard of living at risk. “The deal is that the State is only going to cover the basics,” he said. “The rest is up to us and that requires people to think carefully about the long-term need for income versus the short-term appeal of capital. The only true pension freedom is having enough to live on in retirement.
“At the moment the Government is offering what looks to be a generous pension top-up scheme to those who retired before April last year. Take-up has been surprisingly low given the guaranteed, inflation-protected returns on offer, suggesting that people are thinking more about having jam today than income tomorrow when they are going to need it.”