Many people are concerned about the level of income they'll receive when they retire, but it looks as though this anxiety could be largely unnecessary, with research from Canada Life showing that retirees have actually seen their incomes rise at a much faster rate than everyone else in the last 20 years.
The figures show that the typical annual household income of a retiree has increased by 127% since 1995, far outweighing the 99% growth enjoyed by the rest of the population. In fact, the average income for a retired household now stands at £23,695, a significant increase from the £10,427 recorded 20 years ago, something that's been largely driven by a boost in income from private and occupational pension schemes (which has tripled over the 20-year period) as well as the state benefit (income from which has more than doubled at 119%).
Inflation has undoubtedly had a more negative impact, standing at just under 50% in the same period, meaning that the average retired household income has risen by 77% in real terms (compared with 49% among the rest of the population). The low interest rate environment will also have meant that income isn't quite as high as it could have been, with income earned from savings and investments having fallen markedly since 1995.
Nonetheless, the boost in retirement income is clear, and the figures become even more dramatic once population growth is taken into account: the number of retired households has grown by 1.2m since 1995 to 7.5m, which means that, overall, the collective annual income of retirees has risen by 170% in the same 20-year period, up from £65.4bn in 1995 to £176.8bn today.
In contrast, the total income of non-retired households stands at £933.6bn, a rise of 118% in 20 years, far less than the 170% boost in retirees' income. The divergence between the two groups is accelerating, too, as since the recession, the average retired household income has grown by 14.3% in real terms, while non-retirees have seen theirs fall by 4.4% over the same period – meaning that retirees have enjoyed improving living standards in recent years, while the wider population has seen theirs eroded by the rising cost of living.
Average retirement incomes are still far lower than the working-age counterpart – the average non-retired household income stands at £47,555, compared with the £23,695 average of a retired household – but once adjusted for taxes and household size, the so-called equivalised disposable income of non-retired households is only 32% higher than retired ones', the narrowest gap on record. Retired households also tend to have lower living costs, such as housing, and they're also able to save more, stashing away an average of £282 per month (£3,380 per year), with one in 10 saving more than £500 a month.
"The financial firepower of the UK's growing silver army has rocketed in the last 20 years," said Richard Priestley of Canada Life, "as the rising population is combining with a rapid increase in retirement income. Older people have higher incomes than ever before, both in absolute terms and compared to the wider population.
"Even during the recession, average retired household incomes increased in real terms, while the wider population saw its living standards shrink. The current standing of living among retirees is better than ever; there are poorer groups, but retirement is likely to be a more pleasant and comfortable life for most."
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