Retired households are much more likely to be towards the bottom of the UK income distribution – whereas they made up 35% and 41% of the bottom and second quintile groups respectively, they only made up 10% of the richest fifth in 2011/12.
Amongst retired households there is a higher degree of income inequality before taxes and benefits than for non-retired households. One way of looking at income inequality is to see what proportion of income is received by the richest fifth (20%) of households. In 2011/12, the richest fifth of retired households received 57% of total original income for all retired households. In comparison, the richest fifth of non-retired households received comparatively less at 47% of total income for that group.
Taxes and benefits have a particularly significant redistributive effect on the income of retired households, meaning that, in contrast, disposable income inequality is much lower for retired households than for non-retired households. Cash benefits play by far the largest part in bringing about this reduction, due principally to the state pension. Of the total value of retired households’ cash benefits, just over three-quarters (78%) was due to state pension income.
On average, in 2011/12 the poorest fifth of retired households received £7,700 per year from cash benefits, while those in the other quintile groups received between £10,200 and £11,700 per year. Cash benefits represent almost half (49%) of retired households’ total gross income on average, a proportion which is higher for poorer households and lower for richer households (78% for the poorest fifth of retired households and 26% for the richest fifth).
Perhaps unsurprisingly, retired households derive significantly higher benefits from the National Health Service (NHS) than non-retired households, on average. The benefit in kind from the NHS is spread fairly evenly across the income range of retired households and in 2011/12 it was worth an average of ÂŁ5,700 per year, per household. The benefit derived from the NHS makes up an average 96% of the total benefit in kind received by retired households.
