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Young adult incomes fall financial crisis pensioners recession proof

Recession-proof pensioners are emerging from the financial crisis earning more money than they went in with, but the same can't be said for young adults whose incomes have taken a big hit.

High unemployment and frozen wages have meant that among people in their 20s the median income fell by 12 per cent between 2007/08 and 2011/12, allowing for inflation.

Influential think-tank the Institute for Fiscal Studies found that over-60s went through no such difficulties in the same period, as their median incomes rose by between 2 and 3 per cent.

Different story: Pensioners have seen their incomes rise during the financial crisis, but those in their 20s have suffered.

At a time when the Government is considering removing certain bonuses - such as the winter fuel payment - from wealthy pensioners, it is telling that the IFS has identified benefits as a reason why the over-60s have had a smoother ride at a time of austerity.

Its report said: 'The relative poverty rate for pensioners fell sharply - by more than a quarter - over those four years.

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'The primary reason for this is that, unlike wages, benefit rates broadly kept pace with inflation over the period, and benefits are a particularly important income source for low-income pensioners and families with children.

 

'On the other hand, relative poverty among working-age adults without children increased, driven by increasing levels of unemployment, and falls in real wages.'

Overall, average incomes fell in 2011/12, reaching 7.2 per cent lower than their mean peak in 2009/10, and 5.8 per cent lower than the median.

Average incomes for people in their 20s fell more than any other age group in those four years.

And the IFS says the widening gap between young and old incomes is part of a long trend, with median pensioner income almost doubling since 1979, compared with 50 per cent for families with children and just a third for working-age people without children.

While in the 1960s and 1970s OAPs were up to eight times more likely than others to be poor, 40 years later they are now no more likely than anyone else to be - and even less so when lower housing costs are factored in.

But while their incomes have risen, recent studies have suggested some pensioners are going into retirement with hefty debts still to pay off, while their investments have also provided lower than expected returns.

Figures: Research from The Institute for Fiscal Studies shows changing poverty rates over the last 50-odd years.

David Phillips, senior research economist at the IFS, said: 'The face of poverty has become much younger during recent decades.

'Whereas in the 1960s and early 1970s the poverty rate for pensioners was around six to eight times as high as for working-age adults without children, by 2011/12 the risks had near enough equalised.

'Indeed, once housing costs are accounted for, pensioners actually had a substantially lower risk of poverty by 2011/12.

'This is in many ways a triumph of social policy. But these figures also confirm that it is young people who have suffered most as a result of the recent recession and who are now at risk of falling further behind.

'It is important that policymakers and politicians understand these profound changes to patterns of low incomes and respond accordingly.'


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