Baby boomer couples are ‘better off in retirement’

Difference in income between rich and poor pensioners is now higher than ever

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The Independent Online

They lived through the long decades of post war prosperity enjoying the support of the welfare state, generous occupational pensions and soaring house values. Now new research has found that more than eight out of 10 baby boomer couples are better off in retirement than they were whilst working.

The study by the Institute of Fiscal Studies (IFS) shows further evidence of the growing wealth gap between the generations with retired couples born in the 1940s significantly better off than their children or grandchildren, who must also make ever greater contributions towards their own pension costs. Researchers found in the vast majority of cases middle class couples were wealthier after finishing work than they had been whilst in full time employment.

Cormac O’Dea, a senior research economist at the IFS who co-authored the report,  said it did not mean that significant numbers of pensioners were not struggling to make ends meet. But he said: “The large majority of couples reaching state pension age in recent years have more wealth than necessary to maintain their standards of living into retirement. This is a cohort that has, as it has turned out, ended up saving more than they needed for retirement. The picture for future generations, however, may look quite different.”

The study found 84 per cent of couples now in their 70s had accumulated enough wealth to maintain or even improve their standard of living into and through retirement when the value of their house was taken into account. Eight out of 10 baby boomers were able to replace at least two thirds of their average annual working life income from their state and private pensions alone whilst 40 per cent earned more in real terms – even though they faced considerable lower outgoings than younger families or singles. The figures were even higher when housing and other wealth holdings were taken into account.

The results appear to challenge findings by charities such as Age UK, which has estimated that one in six pensioners are living in poverty with those in their 80s, women and members of ethnic minorities among the worst affected.

James Lloyd of the Strategic Society Centre said the difference in income between rich and poor pensioners was now higher than ever, which made it more difficult for policymakers to target interventions to help those genuinely in need.

In the South East of England, for example, the poorest quarter of over-65s had an average income of £225 a week compared to the richest five per cent who received £750. He said many older people had seen the value of their pensions fall in value since the economic crash, whilst others were unable or unwilling to turn their valuable homes into an income or downsize to generate cash to fund their retirement. “Whilst it is true there are extremely wealthy pensioners with property wealth there are some who own their own home but live in income poverty. Talking about older people in terms of wealth is becoming increasingly meaningless,” he said.