Pension age is the most comfortable place to be right now.
Pensioners now have higher average weekly incomes than working age people.
Research from the Institute for Fiscal Studies (IFS) has found that pensioners on average earn £394 a week, compared to the £385 a week that the working age population takes home. It represents a significant shift since 1990, when pensioners were about 30% worse off than workers.
The IFS put this down to the generosity of work pensions, better support from the state and baby boomers paying off mortgages before retirement age.
Incredibly, the IFS reckons that around 40% of pensioner households earn more in retirement than they did on average during their working lives.
It can't continue
However, things will soon change. The IFS said that pensioner wealth will collapse again in a decade, leaving workers who are currently in their 20s, 30s and 40s worse off.
For starters, younger people are finding it incredibly difficult to get onto the housing ladder, which is why the IFS says there has been “an extraordinary fall in rates of home ownership". On top of that, future state pensions will be far less generous, while ‘final salary’ pension schemes have all but disappeared.
Paul Johnson, director of the IFS, said: “Younger generations are also likely bearing some of the cost of these generous occupational pension schemes from which they themselves will never benefit.”
The end of the pension 'triple lock'?
So what’s the answer? The IFS believes the Government will need to take action to ensure state and private pensions are more stable and sustainable, and that includes ending the pension ‘triple lock’.
Currently pensions are protected by the ‘triple lock’ policy where it rises every year based on whichever is highest of inflation, earnings growth or 2.5%. According to Johnson, at some point this policy will prove to be “prohibitively expensive”.
He added that the retirement age has to go up significantly to sustain the system.
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