Salaries Boost Incomes For Retirees Who Carry On Working

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Pensioners who have recently retired have incomes which are an average £66 a week higher than those who gave up work longer ago.

The difference is down to recent pensioners phasing in retirement by continuing to work part-time, says research by financial firm Aegon.

The data shows recently retired pensioner households have an average income of £392 a week, compared to £326 a week for longer retired pensioner households.

For recently retired pensioners, 26% of household income is derived from working – double the proportion for longer retired pensioners.

The analysis also highlights unequal income distribution between pensioner age groups.

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Changing retirement patterns

Just 13% of pensioner couples where the oldest partner is over 75 have an income in the top fifth of the pensioner net income distribution compared to nearly a quarter (23%) of pensioner couples where the oldest partner is under 75.

Steven Cameron, Pensions Director at Aegon, said: “Government figures show older pensioner households are lagging recent retirees when it comes to their income. Changing retirement patterns could be a reason for this as many people are now adopting a transitional approach to retirement by continuing in employment after traditional retirement ages, while reducing their working hours over time rather than a cliff edge approach.

“The figures show that since 1995, earnings income for new retirees has more than doubled from an average of £64 to £168 per week on top of personal and state pension incomes.

“For individuals in the early stages of retirement, many of who are in the Baby Boomer generation, pensioner poverty generally is at an all-time low, but as these figures are based on average (median) incomes, it must be remembered that there are many retirees with incomes substantially below the average figures.”

Generous pensions

Cameron also explained that favourable economic conditions have boosted post-war pensions.

“Many but by no means all retirees will also be benefiting from generous defined benefit pensions, but this feature will tail off for future retirees, making it unlikely that each future wave of newly retired will have average incomes higher than the previous one,” he said.

“Policymakers need to ensure they look at the changing income profiles of pensioners to understand the distribution of wealth across this large and growing proportion of the population. Adopting a ‘one-size fits all’ approach would be dangerous and risks overlooking what can be significantly different financial challenges facing pensioner groups of different ages and wealth.”

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