Data that has been released by the Office for National Statistics (ONS) has shown a sharp contrast when comparing the financial positions of the retired and non-retired prior to the recession to now.
Between the years 2007 and 2015, the average disposable income for pensioners increased from £19,935 per year to £21,108, representing an increase of nearly 11%. However, during this same period of time, the average working household found that their disposable income actually fell by £773 to £28,092.
This means that whilst working households have less disposable income year-on-year, retired households are enjoying more disposable income, which is narrowing the income gap more than ever before. The reasons for this are twofold:
- Increase in saving - The issue of retirement savings has been in the news more over the last few years, with dire warnings of insufficient cash in the government coffers to pay generous state pensions and retirement benefits. This has led to more people beginning to think about their retirement and saving more towards it.
- Triple-lock pensions guarantee - This was introduced by the Conservative and Liberal Democrat coalition and guarantees that pensions rise by what is the highest out of:
- the rate of inflation
- growth in average earnings
Working households on the other hand have seen their income affected much more negatively, their wages increasing at a rate slower than prices.
However, it shouldn't be assumed from these figures that all is rosy for those that are retired. With one in seven 70 year olds still paying off a mortgage and many others existing on a basic state pension of £115 per week, life is tough for many. And if workers, who are seeing their incomes rise at a much slower rate than their retired counterparts think that retirement will be easier, they are mistaken. By the time that people in their 20s, 30s, 40s and even 50s retire, the outlook will be much different, and much bleaker.
It is for this reason that the government has brought in their auto enrolment initiative. Currently rolling out, it sees every eligible worker in the UK enrolled into an occupational pension scheme in an attempt to kickstart people into saving for their retirement. It seems to be working, with 90% of people so far auto enrolled choosing to stay in their scheme. However, auto enrolment shouldn't be seen as the answer to the nation's retirement problems in its entirety, as people still need to plan properly and save more if they want to have a comfortable and financially worry-free retirement.