The household income of recently retired pensioners is on average 20 per cent higher than older pensioners, Aegon has found.

Following analysis of Department for Work and Pensions data, Aegon revealed that the average weekly income of recently retired households is £392, after taxes and national insurance.

Comparatively, the average weekly income of a less-recently retired pensioner was 20 per cent lower, at £326.

Aegon found that that earnings income was the “main driving force” behind the discrepancy, with 26 per cent of recent retiree household income coming from earnings, compared to 13 per cent of older pensioners income.

The difference in the proportion of earnings and income highlighted “the growth of a transitional approach to retirement”.

Commenting on the findings, Aegon pensions director, Steven Cameron said: “The government figures show that older pensioner households are lagging behind recent retirees when it comes to their income.

“Changing retirement patterns could be a reason for this as many people are now adopting a transitional approach to retirement by continuing in employment after traditional retirement ages, while reducing their working hours over a period of time rather than a ‘cliff edge’ approach.”

The data also highlighted an unequal distribution in income between pensioner age groups. Just 13 per cent of pensioner couples where the head is over 75 have an income in the top fifth of the pensioner net income distribution compared to 23 per cent of pensioner couples where the head is under 75.

However, Aegon warned that future retirees should not assume that their income will be higher than previous generations, due to the decline in defined benefit pension schemes.

Cameron added: “The retirement income of the post-war generation has been boosted by favourable economic conditions. Many but by no means all retirees will also be benefiting from generous defined benefit pensions, but this feature will tail off for future retirees, making it unlikely that each future wave of newly retired will have average incomes higher than the previous one.

“Policymakers need to ensure they look at the changing income profiles of pensioners to understand the distribution of wealth across this large and growing proportion of the population. Adopting a ‘one-size fits all’ approach would be dangerous and risks overlooking what can be significantly different financial challenges facing pensioner groups of different ages and wealth.”

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