Retired households in the UK now have more disposable income than those of working age, according to a new report from the Resolution Foundation think tank.
The report says that the average pensioner household is now £20 a week better off than a working-age household, after housing costs. In 2001, pensioners were £70 a week worse off.
The Resolution Foundation highlights four factors that help account for the rise in incomes for retired households: rising occupational pensions; a growth in the number of pensioners who still work; generous state benefits; and the growth in home ownership among the recently retired.
But they warn that this trend is unlikely to continue among future generations, with younger people less likely to own a home or have a defined-benefit pension scheme.
Adam Corlett, an economist at the Resolution Foundation, commented that: “The big challenge we face as a society is to ensure that the record incomes that a new generation of pensioners are enjoying are not a one-off gift, and can endure for future generations too.”
In her IZA World of Labor article on late-life work and well-being, Carol Graham argues that flexible retirement is a potential solution to problems surrounding unemployment, aging populations, and public pension burdens. She writes that: “While the potential transaction costs of such arrangements, as well as their feasibility in more precarious labor markets, are concerns, policies that support more flexible labor market arrangements, including incentives for job-sharing and remaining in the labor force after retirement age, can help overcome these problems.”
Elsewhere, Marek Góra has written for us about redesigning pension systems to reflect demographic changes. He argues that: “A simple and transparent structure and individualization of pension system participation are the key preconditions for an intergenerationally just old-age security system.”
The Resolution Foundation report, As Time Goes By, can be found here.