The Office of National Statistics (ONS) released figures on pensioners’ income this week, which highlighted a 12% rise in the number of retirees who are in the top half of the overall population income distribution.
This has grown from 39% 20 years ago to 51% in 2016/17.
The figures, based on a sample of around 7,000 pensioners in the UK, also showed 53% of retired pensioners received more than half of their gross income from private sources (all income excluding that from state benefits).
Jon Greer, head of retirement policy at Southampton-based Old Mutual Wealth, said the report highlighted “a growing income discrepancy between pensioners and younger generations.”
“A decline in pensioner poverty is certainly a success, however, today’s numbers bring into harsh reality how precarious the situation is and how the generations of tomorrow may not be so fortunate, despite the success of auto-enrolment,” he said.
Mr Greer put forward two main reasons for the income gap, firstly “pensioners have saved more and are benefiting from occupational pension schemes” and secondly, pensioners were more likely to own their own home, with 74% of over-65s doing so.
He added: “Huge swathes of the younger population are benefiting from auto-enrolment and as such are making a pension provision for their retirement.
“The success of auto-enrolment will start to be tested in the coming weeks as contribution rates are set to increase.
“On average, Britons will have received relatively modest wage increases of 2.5% last year, according to the OBR.
“This means many people are really being asked to ditch extra pounds in their pocket in favour of diverting money to a pension.
“Calculations show that once auto-enrolment increases are taken into account, someone earning £30,000 a year could expect a take-home pay increase of only 0.97%, while an individual on £45,000 would get only 0.72%.”
Meanwhile he called for fresh thinking on pension savings for self-employed people, with rates having fallen to just 16% in 2016/17.
“A savings policy for the self-employed needs to acknowledge that there are legitimate reasons why some self-employed people do not engage in pensions.
“One of the biggest challenges facing this group is the lack of certainty and security of income, which is particularly evident for those with lower and moderate incomes.
“It makes sense to keep an open mind about creative savings solutions for the self-employed and we hope the DWP will consider a pension ‘sidecar’ which would give early access to cash if required, which could be helpful to self-employed people with volatile or insecure income,” he said.