Young suffer as pensioners continue to prosper, says IFS

Older people have enjoyed higher incomes over the past seven years

Young people have suffered a drop in income since the financial crisis, but pensioners have enjoyed a big rise, the Institute for Fiscal Studies has said.

Pensioners are now the least likely group to be in income poverty, according to the think-tank.

The IFS report also said that most poor people now live in households where someone is working.

The government said there were record numbers in work, and that wages were rising faster than inflation.

On average, incomes rose by 2% in real terms between 2007/08 and 2014/15, according to the IFS.

However, that figure concealed very different experiences for different generations:

• Incomes for those aged over 60 rose by 11% over the period, when measured before housing costs.

• Those aged 31 to 59 have had no change in incomes

• Incomes for those aged 22 to 30 have fallen by 7%

'New poor'

The IFS report acknowledged that the proportion of children living in workless households has dropped, from one in four in 1994/5 to just one in six in 2014/15.

But in two-thirds of cases, children classified as poor now had a parent with a job - households the IFS described as the "new poor".

Increasingly middle income families were now also sharing the experience of poverty, the think tank said.

Half of these families now rented their homes, rather than owning them.

And while poorer families had become less reliant on state benefits, middle income families with children now get 30% of their income from the state.

Twenty years ago, the figure was 22%.

The new Work and Pensions Secretary, Damian Green, said there were record numbers of people in work, and wages were rising faster than inflation, but more needed to be done.

"As our economy grows, we will also be building our skills base, developing a proper industrial strategy and improving education to help everyone reach their full potential," he said.

Younger families have suffered most from falling incomes

Jobs market

One reason for the growing income gap between young and old was that pensioners have experienced a "strong growth" in benefits, the IFS said.

Since 2010 the state pension has risen according to the "triple lock" - whichever is the higher of inflation, earnings or 2.5%.

Pensioners are also entitled to non-means-tested winter fuel payments, free bus travel, free prescriptions, a Christmas bonus - and a free TV licence for those aged 75 and over.

Another reason their incomes have risen is because more people over 60 are still working.

By contrast young people have failed to benefit from an improving jobs market as quickly as some other age groups.

Earlier this week research from the Resolution Foundation found that workers born since 1990 typically earned £8,000 less in their twenties than those born in the 1970s.

The insurance company Prudential said that people planning to retire in 2016 expect to have an income of £17,700 a year, the highest number they have recorded.

Brexit effect

In its report the IFS also said that living standards were likely to be hit by the Brexit vote.

"Virtually all serious analysis suggests that the uncertainty over the UK's future relationship with the EU will lead to a smaller economy and hence lower living standards over the next few years than we would otherwise have had," the report concluded.

"But precisely how this will feed through into employment, earnings, and tax and benefit policy is impossible to predict with confidence."

However, the report also noted that more people were in work than ever before and that inequality in wages had fallen.