14th June 2013
The recession appears to have done little to harm pensioners’ wealth as new research shows they have enjoyed faster income growth than any other age-group in the UK over the past three decades writes Philip Scott.
A report from the Institute for Fiscal Studies: Living Standards, Poverty and Inequality in the UK: 2013, concluded that the over-60s are the sole age group to have become better off since 2007/08.
Middle income among people in their 20s fell by 12% between 2007-08 and 2011–12, after adjusting for inflation, the largest fall of any age group.
In contrast the middle income of the over 60s grew by 2-3% between 2007-08 and 2011-12, driven by benefit stability such as the state pension.
These differences amongst age groups are not new, but reflect longer-term trends. Median, or middle income for people in their 20s plummeted by 12% over 2007-08 and 2011-12, allowing for inflation, the steepest fall of any age group. The result was primarily as a result of low or frozen wages and greater unemployment.
Key findings in the report for the population as a whole found that average incomes fell again in 2011–12, reaching 7.2% below their 2009–10 peak at the mean and 5.8%below their 2009–10 peak at the median.
Notably the analysis found that working- age adults without children are now about as likely to be poor as the rest of the population. This is a huge contrast to the historic norm and partly reflects substantial increases in the number living in workless families and a decline in the relative value of out-of-work benefits for working-age adults without children.
But relative poverty rates among working-age adults without children living in families where someone works have also increased. Between the late 1970s and 1996–97, this reflected an increase in hourly and weekly earnings inequality. Since 1996–97, it reflects the fact that earnings growth was generally weak for this group right across the income distribution.
The rise in in-work poverty means that almost half of all poor working-age adults without children work or have a partner who works, compared with just 30% in 1978–1980.
Commenting on the findings, David Phillips, senior research economist at the Institute for Fiscal Studies says: “The face of poverty has become much younger during recent decades. Whereas in the 1960s and early 1970s the poverty rate for pensioners was around six to eight times as high as for working age adults without children, by 2011–12 the risks had near enough equalised. Indeed, once housing costs are accounted for pensioners actually had a substantially lower risk of poverty by 2011–12.
“This is in many ways a triumph of social policy. But these figures also confirm that 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.”
The future is not looking to bright in retirement for the younger generation either as a recent report from Scottish Widows found that thousands are set for a shock in retirement as pension savings rates have collapsed to an all-time low. The firm found that less than half, at 45% of working Brits over the age of 30 who could and should be preparing financially for their old age are presently saving enough, asserted to be at least 12% of income, according life group Scottish Widows in its 2013 Pensions Report. The research found that one in five Britons are actually saving nothing at all for their retirement and over a third not nearly enough.