New Pensioners Incomes Series data from the Department for Work and Pensions (DWP) reveals that the average income for pensioners after housing costs fell from £376 a week in FYE 2021 to £349 in FYE 2022. This equates to a drop of £27 per week, or £1,404 a year.
The DWP suggests that some of this difference may be due to a limited and less representative 2021 pensioner sample caused by the coronavirus pandemic, but other factors also contributed to this shift in pensioner income.
Jon Greer, Head of Retirement Policy at Quilter, highlights the importance of the state pension for pensioners’ income, saying, “97% of all pensioners were in receipt of the state pension in 2022, so even within the context of the skewed 2021 dataset, we know that the below-inflation uprating of the state pension in 2022 will have had a real impact on average pensioner income and their subsequent spending power.”
Female pensioners were more heavily reliant on benefit income, including the state pension, with Greer noting that “benefit income made up 60% of total gross income for single female pensioners, compared to 48% for single males.”
Despite the decline in average income, pensioners’ overall income distribution has improved since 1995, with 50% of pensioners now in the top half of the overall population income distribution.
Greer urges people not to rely solely on the state pension for their retirement income and emphasizes the importance of pension savings during working years: “These latest figures reiterate the real need for people to save for their retirement and the importance of not solely relying on the state pension to meet your spending needs in later life.”
With the recent overhaul of pensions in the Chancellor’s spring budget, he encourages people to prioritize pension savings for their financial well-being in later life: “While not everyone will be able to make full use of the increased annual allowance, it is important that people prioritise pension savings and appreciate just how much of a difference it will make to their financial wellbeing in later life.”