New official figures from the Office for National statistics (ONS) shows that pensioners’ incomes increased by 2.5 times in real terms between 1977 and 2011, outstripping the performance of the wider economy.
The figures show that the average disposable income for a retired household was £17,700, over two and a half times more in real terms than in 1977. This compares to average disposable income for working households of £35,000.
In 1977, retired households received income of about one-third of working households, now it is almost exactly half the level that working households receive.
The ONS says that pensioners have enjoyed faster increases in income than working households over the last 30 years. Working households have seen their income double over the same period.
Income levels for pensioners grew every year in this 34-year period. Income for non-pensioner households tended to follow the performance of the overall economy, growing faster in times of economic growth, but dipping in real terms during periods of recession.
The ONS data shows that 20 per cent of retired households receive an annual income of more than £42,000 and that the gap is widening between pensioner “haves” and “have nots”.
The top 20 per cent of pensioner couples have an average income of £815 a week, compared to the bottom 20 per cent who receive an average of £221 a week. Single women also receive less than single men, £279 per week compared to £345.
The main cause in the rise in pensioner income levels comes from income received from private pensions. This has been supplemented by a rise in state pension income levels. However, since 1991, investment income has been a drag on the income received of pensioners.
The data puts a spotlight on the benefits from the economy and demographics that the baby boomer generation received that is now at retirement age.
They worked during periods of very high employment and saw almost uninterrupted growth in house prices and were able to take advantage of generous pension schemes, including final salary pension schemes that are not open to workers now.
People who have recently retired are better off than the generation before and likely to be a lot better off than future generations of retired people. However, with more generous pension schemes available to the baby boomer generation, perhaps there was more incentive to say. Hopefully, auto-enrolment will incentivize the next generation to save for retirement, especially as we are likely to live longer.
Ashley Seager, co-founder of the Intergenerational Foundation thinktank, said: "Today's young people are going to have to work much longer for a considerably smaller pension than their parents or grandparents. They will also face higher taxes over their lifetimes to pay for the generous pension promises that people now retired wrote to themselves and which are becoming completely unaffordable."
However, Ros Altmann, the director general of Saga, said the pensioners who have the highest retirement incomes are the ones who worked the longest.
She said: "Yes, there are pensioners who have done very well from our final salary pension system and have high incomes. But these are not the majority. If you read the figures carefully you will see that the pensioners with the highest incomes are those that have kept on working.
Tom McPhail, head of pensions research at Hargreaves Lansdown believes we have seen the peak of benefits available to pensioners who saved in a final-salary scheme.
He said: "The high-water mark of the British pension system was around the year 2000. The current generation of pensioners are enjoying the benefits of final salary schemes.
"But we are at the top of the hill and looking down. It will be a very different picture in 20 years' time."