Findings from think tank the Resolution Foundation “that pensioner households are now better off than working households is in the main due to ever-richer households reaching retirement, namely the asset-rich baby boomer generation”, said Greer.
However, the financial burden on the current generation of workers paying for today’s retirees is “generating a problem” and the government needs to focus on “rebalancing the intergenerational contract”, he said.
Pensioner income growth
Resolution Foundation’s ‘As Time Goes By’ report, released on Monday, found that there had been strong recent growth in typical pensioner incomes driven by new cohorts of pensioners who are more likely to still be in work, own a home, and have access to generous private pension pots.
As a result, typical pensioner households (after housing costs) are £20 ($25, €23) a week better off than those of working age.
This represents a significant shift from 2001, when typical working households were £70 a week better off than retirees.
Intergenerational unfairness
Greer said: “The report further substantiates feelings of intergenerational unfairness that have become an increasingly tense point. The reasons are complex, but things that may have been taken as fairly straightforward by previous generations: owning your own home and building up a funded pension, are now much more challenging for younger generations today.”
Working age taxpayers are also facing a growing bill to cover the state pension, Greer said. “At the moment, we operate a ‘pay as you go’ system for state pensions, meaning the national insurance paid today is for the current generation of retirees.
“While the system has its merits, society has changed and it’s generating a problem.”
Greer called on the government to “pursue a policy agenda focused on rebalancing the intergenerational contract”.
“The most obvious target is the state pension triple lock, which was introduced to remove pension poverty and it has been successful in that endeavor. Now that the relative decline in the state pension has reversed, the triple lock should be reviewed from 2020 and replaced with an earnings link.”
Greer’s comments follow calls from the government’s Work and Pensions Committee in November to scrap the pension guarantee as it is “heavily skewed” towards baby boomers.
The triple lock guarantees that pensions rise by the same as average earnings, the consumer price index, or 2.5%, whichever is highest.
The report, however, argues that the increase in pensioner income has not been equal.
