More pensioners having to work to supplement incomes

Key Retirement Solutions comment on the latest Pensioners' Income Series figures from the Department for Work and Pensions which reveal that more of the UK population are working in their retirement years to supplement their incomes. The total of all pensioner units (comprising single pensioners and couples) receiving income from earnings for 2007-08 was 17% compared to 12% in 1997-98. This means that at least 1.4 million pensioners are still working in retirement. The figures also reveal that pensioner couples are more inclined to rely on earned income with 29% being in receipt of income from earnings, up from 22% for 1997-98.

Gross pensioner income (from all sources for pensioner units aged 65 or over) for 2007-08 was £366 per week compared to £277 for 1997-98, an increase of 32%. The increase in income from earnings for the same period was 71% from an average of £21 per week for 1997-98 to £36 per week for 2007-08. Income from earnings now accounts for 10% of average gross pensioner income compared to 8% for 1997-98. Income from state benefits (including state pension) increased over the period by 22%, however income from benefits still remains the highest contributor to pensioner income, providing 48% of pensioner income.

From 1997 - 2008 the RPI has increased by 34.7% compared to a net average increase in pensioner income of 29%. The difference between the gross and net income figures have also widened. The average difference for 1997-98 was 16% and for 2007-08 19%, showing that taxation is hitting pensioners further still.

The table shows average gross income levels by source and the change over the period reviewed. It also shows the net income figures for the same period and the percentage difference between gross and net. Other than the increase in personal pension income, reflecting the increase in personal pensions against occupational pensions, earnings show the largest increase in contribution to pensioner income.

Dean Mirfin, Key Retirement Solutions Group Director, said: "The worrying trend that these new figures show will not come as a surprise to anyone, which is that state support is decreasing and pensioners are having to be more self reliant. With falling retirement provision ahead we expect that the percentage of income coming from the state will fall further behind the cost of living. Of further worry is the widening gap between pensioners net and gross income, showing that taxation of our older population is rising. The net increase in income has fallen 5% below the RPI over the period, a strain which many pensioners increasingly will struggle to bear.

"Many pensioners understandably are also turning to equity release to help fund their retirement income. Equity release allows those with wealth tied up in their homes to unlock that wealth for their benefit. A typical release of equity could produce an additional weekly income of over £78, equating to an increase in average net pensioner income of over 25% from £308 per week to £386."

For anyone looking to release equity from their home to help ease the financial burden in retirement, key's independent guide to equity release is the best place to start. This can be obtained by visiting keyrs.co.uk/equity-release-guide where the guide can be downloaded.