Benefits now account for almost 50% of retired household incomes

13th August 2015


Benefits make up nearly half of the average retired household income equivalent to around £10,800 claims new research.

MetLife’s analysis of government data showed that the typical retired household receives around 48% of its income from benefits with the State Pension making the biggest contribution of an average £8,750 per household.

But in contrast the retirement specialist found that investment income accounts for only 6% of household retirement income at just £1,420 a year per.

The analysis of pensioner household incomes shows annual average private pension income per household is the biggest single contributor accounting for 42% of household income underling the success of retirement saving.

MetLife has warned, on the back of its research that anyone who runs out of money and needs to rely on the State would suffer a 52% drop in household income.

Dominic Grinstead, managing director, MetLife UK, said: “The State Pension is a good safety net and other benefits will help maintain a basic standard of living for retired households.

“The reforms due next year with the flat rate single tier pension could provide further help but it is clear that people who run out of money in retirement will face major cuts in their standard of living.

“Ensuring you have a guaranteed level of income and can plan with some certainty is more important now than ever following the launch of pension freedoms.”

Analysis shows other major benefits include housing benefit which contributes around £650 to the average retired household and pension credits which are worth £408 a year along with Disability Living Allowance worth £355 a year.

For the wealthiest retired households, benefits are worth around 21% of household income compared with 79% for the least well-off.

8 thoughts on “Benefits now account for almost 50% of retired household incomes”

  1. stevie wonder says:

    The State Pension is NOT a benefit!!!! I have paid my dues all my life for your so called benefit!!! It is an entitlement that I and others like me have dearly for!!!

  2. Jive Bunny says:

    “Analysis shows other major benefits include …. Disability Living Allowance worth £355 a year” AHEM!! Disability Living Allowance (DLA) is not payable if you’re over 65!!Now, although you may become a pensioner as young as 55 it’s highly unlikely, but, in the unlikely event you become a pensioner prior to age 65 the MINIMUM payment is £21.80 pw or £1133.36 pa!!! How that fits with “£355 a year” is beyond me!! Unless they’re saying people on DLA are only in receipt of it for about 15 weeks????


  3. george the first says:

    What is the true figure, when State Pension, which is not a benefit, is removed from the figures

    1. Jive Bunny says:

      What do you mean by “benefit”? I believe state pension is a benefit i.e. a payment which is advantageous to the recepient.

      There are contributory benefits like State Pension, Contributory JSA, universal benefits like Child Benefit, Universal Credit and disability benefits like Disability Living Allowance (now known as Personal Independence Payment), Attendance Allowance and means tested benefits like Income based JSA and Pension Credit.

      They are all benefits, but different types of benefits so I don’t get where you and Stevie Wonder are coming from?

      1. george the first says:

        Strange that the government website doesn’t use that terminology. Their list of ‘benefits’ does not include pensions.
        Methinks you are trying to use the word in the literal sense to muddy the waters.

  4. David Lilley says:

    There can be a massive difference between the mean/average and the median/typical. And when it comes to the average income and the average pension income the difference between the typical and the mean can be enormous.
    We all know that the average wage is calculated by adding all the wages together and dividing by 30.1m and has been about £26,000 for a number of years. But we also know that 1% earn more than £150,000 pa and that the top 1% of earners pay 25% of income tax.
    The median wage of 30.1m wages is the average of the middle wages and discounts the fact that high earners disproportionately drive up the average wage.
    The typical wage and typical pension is much less than the average wage and pension but we don’t get the numbers for the typical. The median, the middle number, where most of us are.
    So when I read a few years ago that the average pension was £20,000 pa, I thought, how did so many accumulate a pension pot of £400,000 when common sense told me that most pensioners only got the state pension. The answer is the significant difference between the average and the median. The average pension pot is only £30,000.
    Similarly, the benefits cap should be based on the typical wage and not the
    high earner inflated average wage.
    But please correct me if I am wrong.

    1. Jive Bunny says:

      Hi David, this is more like it, something I can disagree on! The “typical” pension/wage/income that we are all on is the average mode, i.e. the income range that the highest number of people are receiving.

      Unfortunately, the mean average of the minimum amount of DLA which I commented on earlier would be £566.68 which disagrees with the numbers produced by MetLife. If Metlife used a median average the number yielded should still agree with one of the DLA rates and the same for the mode average.

      On re reading the piece it looks like MetLife have performed some kind of “average” calculation on different income groups, e.g. those people on Pension Credit and then divided that amount of Pension Credit by the whole statistical sample (including those who don’t receive Pension Credit) which will then result in the “average/all” pensioner(s) being in receipt of Pension Credit, when, given that Pension Credit is a means tested benefit this is clearly not the case. In this way MetLife have succeeded in according Pension Credit Income to every pensioner in the UK regardless of whether they receive it!! They have then gone on to do this with all other income groups (e.g. DLA, Housing Benefit etc) However you look at it , the resulting number is no kind of average at all!!

      MetLife are clearly useless with statistics which creates a question over the effectiveness of their actuaries. In other words avoid taking out any insurance policy with MetLife like the plague! They’ll either miscalculate the odds in your favour in which case you win or they’ll miscalculate against you in which case you lose, but insurance isn’t supposed to be about gambling, it’s supposedly about introducing some measure of certainty for the consumer whilst it is obviously a gamble/statistical odds calculation for the Insurance Company.

      The median is simply the income in the middle of the spread which can end up being a number that very few people receive!!

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