IFS director Paul Johnson said last night that IFS research suggests that pensioners’ incomes will continue to rise for at least the next decade – but it is unlikely that younger generations will earn as much.
Speaking at the Pensions Management Institute in London, Johnson said people born later will not fare as well because future state pensions will be less generous, private sector pensions have shifted from defined benefit to defined contribution schemes, and home ownership rates are falling.
Johnson also said admitted that younger generations are likely to bear the brunt of paying for existing generous pension schemes – even though they will never benefit from the programmes.
The relative wealth of pensioners “represents a remarkable transformation”, Johnson said, pointing out that in the mid-1980s, pensioners were at least three times as likely to be poor as non-pensioners.
“We have achieved an astonishing turnaround in the incomes of pensioners over the last three decades, without increasing public spending to levels seen in many other continental European countries,” Johnson said. “But the longer term future looks very uncertain. Those now in their 20s, 30s and 40s may well end up with lower incomes in retirement than their parents.”
“The focus for policy needs to be on getting private provision right, with more risk sharing, and a rational and stable tax policy,” he added.
Johnson made a series of policy proposals for both public and private-sector pensions, including ending the so-called “triple lock” policy whereby the growth of public sector pensions outpaces inflation and continuing increases in the state pension age.