Long-term trends suggest retirees in the UK could end up bringing in more income than young workers

Young couples and families in the UK are £900 a year worse off compared with a decade ago, while recent retirees’ incomes have increased by more than £5,500 over the same period, the Guardian can reveal.

New data obtained from the Office for National Statistics shows that despite a big rise in employment in recent years, the average disposable income of couples and families in the latter half of their 20s is still suffering from the effects of the 2008 financial crash.

The exclusive findings are revealed as official figures today report a sharp rise in the number of people on zero-hours contracts. There were an estimated 800,000 on such contracts last autumn - up 15% year on year, largely effecting younger workers.

Who's winning? Find out how your income compares with every other generation Read more

Reviewing the findings of the ONS data, David Willetts, the former minister for universities and science, said reversing the growth in the intergenerational divide had become one of the biggest “social and economic challenges of our time”.

After inflation is taken into account, the latest figures show that the average disposable income for households headed by people in their late 20s is stuck below 2004/5 levels. Disposable income is that which is left after direct taxes such as national insurance, income and council tax and these figures have been adjusted to reflect the composition of different household types.

Over the decade the average disposable income for a household headed by someone in their late 60s has gone up by 26%, and most of the rise has come during George Osborne’s stewardship of the economy.

Willetts, regarded as one of the deep thinkers of the Conservative party, said the problem of income disparity between young and old originated before the financial crash.

“These figures show the younger generation has been the worst affected by the financial crisis … But the problem goes back before 2008. Already, younger people were losing out in the jobs market to older workers. That is why we need to offer them a better deal with lower housing costs and better training for work.

“Reversing this growing gap between the generations is one of the big social and economic challenges of our time,” Willetts said.

The findings prompted the chair of the Commons work and pensions committee, Frank Field, to ask whether it was time to scrap the chancellor’s controversial state pension triple lock and if politicians should start guarding against poverty in younger households.

“The main political parties have drawn in the wagons to safeguard all pensioners’ standards of living, regardless of their circumstances,” Field said.

Facebook Twitter Pinterest Frank Field, chair of the Commons work and pensions select committee. Photograph: Anthony Devlin/PA

“Poverty amongst the retired population therefore has been greatly reduced, which of course is hugely welcome, but several more wagons may be required to guard against iniquities among families below retirement age.”

Osborne’s triple lock deal guarantees rises in state pension at either the rate of inflation, wage growth or 2.5%, whichever is greatest.

Questioning whether the policy was fair, Field said: “Can the triple lock pledge be sustainable while a growing proportion of the poor work for their poverty?”

Between 2004-05 and 2014-15 the median equivalised disposable income of households headed by people aged 25-29 fell by 3% in real terms from £31,900 to £31,000 in 2014-15 prices. For households aged 65-69 that figure rose 26% from £21,231, hitting £26,700 last year.

The figure for households headed by someone in their late 20s stood at £33,300 in 2007-08 but was hit badly by the financial crisis, dropping 15% by 2011-12. It took until last year for it to rise back above £30,000.

This measure takes a household’s weekly earnings and subtracts direct taxes such as national insurance, council and income tax.

Just 30 years ago, pensioners were three times as likely to be poor as people in work. However, research published late last year by the Institute of Fiscal Studies (IFS) has shown that, after housing costs are factored in, retirees are now better off than those in work for the first time.

Paul Johnson, the IFS director, said: “If you don’t take account of housing costs the working-age population on average looks better off, but if you do they look worse off [than pensioners].”

He added that, on aggregate, “the generation of younger people now are having to pay a lot more in housing costs than generations before them”.

According to IFS research, pensioners’ incomes are likely to rise for at least the next decade, after which future generations will be unlikely to benefit. This is driven by a drop in home ownership, weaker private sector pension schemes and the expectation that state pensions will be less generous in the future.

Osborne’s previous budgets have seen young people lose out in comparison with the rest of the population. Measures have included cuts to youth services, the tripling of the upper limit on university tuition fees and limiting housing benefit for under-35s to those living in shared accommodation. The Future Jobs Fund, education maintenance allowance and, most recently, student grants have all been scrapped.

Field said his Commons committee was seeking voters’ views on whether it was “fair and affordable to divert a large and growing sum of public expenditure toward pensioners – regardless of their circumstances”, while mainly poor families with children were facing “year-on-year restrictions” on their income.

‘I’d like my own place … I know that won’t come for a long time’



Danielle Nichols, 25, from Chigwell in Essex, is studying to be a dentist after a year working as a receptionist. Her retired grandmother Sylvina McMillan, 71, is helping with the cost of her studies.



Facebook Twitter Pinterest Danielle Nichols Photograph: Graeme Robertson/The Guardian

Nichols says that when she finished her initial degree in human biology, many of her peers felt they needed to go straight to work. “The fees deterred people from pursuing other courses … and they just felt at our age they wanted to incur less debt. Obviously now I have double debt. But dentistry leads to a profession.”

“And it leaves me broke!” McMillan adds, laughing.

She is enjoying her retirement, which she began last year after 50 years of receptionist work. “I’m making the best of it. What choice have I got? I’ve got to enjoy it now.”

McMillan lives in Plaistow, east London, in a home that she finished paying the mortgage on when she was in her 50s.

“I have six grandchildren and one great granddaughter. You have to think what position are they going to be in? In even getting on the property ladder. If you get them to study … they still have to pay that £9,000 a year back.

“They are cutting down on a lot of things and they are telling them you can’t get a pension until you are in your 70s. That would really upset me because you need a bit of life after a certain age.”

Nichols says: “My Nan’s really concerned about us getting off the ground. I’d like to own my own place. Realistically I know that won’t come for a long time, until I’m in a job for a good number of years. When my mum was in her early 20s she already had her own house and had children. But for those my age, you know how expensive it is to live in and around London.”

In her year spent working, Nichols found that despite the jobs being well paid, she couldn’t save because of the taxes and student debt repayments. She and her partner are living at their family homes so they can save money.