The average pensioner income has been largely stagnant, increasing by just £15 over the past 14 years, according to data released by the Department for Work and Pensions (DWP).
Pensioner incomes now sit at £407 a week on average (for 2024), compared to £392 in 2010. The money retirees receive could be from workplace and personal pensions, the state pension, profits from investments, part-time work, and any other sources of income.
This average weekly income drops to £282 for single pensioners and rises to £595 for pensioner couples. Pensioners aged 75 and over have lower incomes than those aged under 75, coming in at £372 and £455 respectively, the DWP data says.
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Thomas Lambert, financial planner at the wealth manager Quilter, says, when the 2010 and 2024 figures are compared to the “steep rise” from £206 in 1995 to £392 in 2010, “it is clear there has been a marked slowdown despite the considerably higher cost of living”.
He points out that when inflation is taken into account, there is a “stark difference” – £392 in 2010 would have been worth almost £587 in 2024 – indicating a “substantial decline in pensioner purchasing power”.
The data also highlights how the gender pension gap continues into retirement: single men have an average weekly income of £292 while single women have a lower average income of £278.
How important is the state pension?
Benefit income, which includes the state pension, was the largest component of total gross income for both pensioner couples and single pensioners, according to the DWP.
This was 56% for single pensioners, while for pensioner couples it was 37%.
Stephen Lowe at retirement specialist Just Group comments: “The state pension and other benefits continue to be the bedrock of retirement finances. In fact, more than half of pensioner couples and four-fifths of singles receive more than half of their income from the state.”
This could also include benefits like Pension Credit and the Winter Fuel Payment.
Lambert remarks that if it wasn’t for the state pension (and the generous annual uprating from the triple lock – which sees payments increase by whichever is higher out of earnings, inflation or 2.5%), incomes “might not have been able to hold level with 2010 for so long”.
The full new state pension is currently worth £221.20 a week (£11,502 a year). It will rise by 4.1% next month to £230.30 a week (£11,975 a year).
The DWP figures also reveal that 62% of pensioners receive income from occupational pensions, while 17% were in receipt of income from personal pensions such as self-invested personal pensions.
More than six in 10 (61%) of retirees receive money from investments, with an average income of £6 per week. About 9% of pensioners who get investment income receive £200 or more a week from their investments.
Will pensioner incomes increase in future?
There could be a fall in incomes in future as final salary schemes start to be phased out from the current crop of pensioners. However, as more people reach retirement with workplace pensions from auto-enrolment, this could help to offset the drop.
Meanwhile, if the state pension continues to be uprated with the triple lock, this could boost incomes.
Lambert notes: “As the coming generations move into retirement and the age of defined benefit schemes comes to an end, it is likely to reveal a significant gap in retirement provision and pensioner incomes may decline as a result.”
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, adds: “Over time auto-enrolment will see people retire with larger pensions, but for the time being the state pension continues to make up the largest component of pensioner incomes.”
Could Labour change the state pension?
While pensions didn’t feature in yesterday’s Spring Statement – and the state pension was spared the benefits overhaul – there are still plenty of rumours around whether the triple lock will remain, and whether the state pension could become means-tested.
David Brooks, head of policy at financial services consultancy Broadstone, says: “In the context of plateauing incomes, the triple lock is clearly playing an important role in supporting the day-to-day household finances of less wealthy retirees.
“In the context of constrained public finances, this is likely to lead to speculation that the means-testing of the state pension could be considered by the government to ensure the spend on state benefits is targeted on those that need it most. However, this would only introduce further complexity into a system that should be as simple as possible.”
Meanwhile, according to Lambert, a review of the triple lock seems almost inevitable due to its “growing burden on government coffers”.
He adds: “However, any change must be handled carefully. The state pension is the single largest area of welfare spending and a vital source of income for millions.”
