How Funding Retirement Has Changed For Baby Boomers

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Baby boomers have significantly higher retirement incomes than pensioners of the same age would have expected 25 years ago, according to new research.

The earnings of middle income 60 to 74 year olds is 60% than the same age group lived on in the 1990s, says Carl Emmerson, deputy director of think tank the Institute for Fiscal Studies.

And earned income in retirement has increased 160% as people work longer as their life expectancy increases.

This rising longevity means men now approaching 50 years old can expect a state pension for 10 years more than they would have done in the 1950s.

Comparing pensions in the 1950s

A 50 year old man in 1950 would, on average, have lived to age 73 drawing the state pension for eight years from the then state pension age of 65. A man now approaching 50 may wait until 68 before receiving a state pension, but can expect to draw the money for 18 years as male life expectancy at age 50 has now risen to 86 years old.

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A 50 year old woman in 1950 would, on average, have lived to age 79 giving her 19 years of state pension from the then state pension age of 60. A woman now approaching 50 might have to wait until 68 before receiving a state pension, but can expect to do so for 20 years as female life expectancy at age 50 has now risen to age 88 years old.

Lower pensions but higher incomes

“The incomes of middle income 60 to 74 year olds are now much higher than they were in the mid-1990s as private pensions and earnings have grown. Future generations may actually end up with lower private pensions,” said Emmerson.

“But there is much capacity for employment rates of older individuals to rise further. For example employment rates of men aged 60 to 64, which have been increasing since the mid-1990s, are still well below the rates seen in the 1970s when life expectancy was much lower and health less good.

“Pushing up the state pension age as longevity increases makes sense. But there is a large – and growing – difference in support that the state makes available to low income households who are just below the state pension age and those who are just above it. Such a big gap may look problematic in the context of a rising state pension age.”

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