Trends in pensioner poverty

TRENDS IN PENSIONER INCOMES

Jonathan Bradshaw

 Introduction

Since 2010 the state pension has been uprated by the triple lock – the better of increases in prices, average earnings or 2.5%. This blog presents some analysis of pensioner incomes in the recent period.

Figure 1 shows that the basic pension has increased in value by nearly £5 per week since 2010 and improved much more rapidly as a proportion of average earnings.

Pensioner poverty

Figure 2 shows that pensioner poverty has also been falling since 2006/7, though not in the most recent year for which we have data.

 

 

Composition of pensioner incomes

Figure 3 for 2015/16 and Figure 4 for 2007/08 provide a decomposition analysis of pensioner incomes by quintile group. Wages and salaries contributed very little to gross income in 2015/16 - 2.2% on average, slightly more for the highest quintile. Private and occupational pensions contribute 43.8% on average in 2015/16, up from 36% in 2007/08, and the contribution is larger for richer quintile groups. The state pension share of gross income is 37.1% on average but 66.8% for the bottom quintile; its share of gross income has changed very little between 2007/08 and 2015/16. Direct taxes are broadly progressive and indirect taxes very regressive; the bottom quintile pays 36.2% of gross income in direct and indirect taxation and the top quintile pays 29.4%.

 

 

Comparisons pensioners and children

Figure 5 shows the increase in equivalent net disposable income of pensioners compared with families with children since 2007/08. In 2009/10, pensioners had 75% of the net income of families with children. By 2015/16, this ratio had increased to 85.6%. Analysis of EU SILC data shows that since the start of the financial crisis the UK, as with almost all countries in the EU, has shifted resources away from families with children and towards pensioners.