Headlines about pensions have been far from positive in the past year; we have seen annuity rates falling as gilt yields hit an all-time low, interest rate languishing at 0.5% and poor investment returns, and let's not mention the coalition's 'granny tax'.

Penions Tools & Tips

Retirement Tips & Tools

However, if a new report by the Institute of Fiscal Studies (IFS) is to be believed, pensioners should stop moaning as they've never had it so good.

Over the past decade pensioners have enjoyed the fastest-growing incomes of any other demographic in the UK. Since 1999 pensioner income has risen 29.4%, compared to non-pensioners 26% rise.

Penions Tools & Tips

Retirement Tips & Tools



Today, more than 40% of pensioners are in the top half of the income scale, compared to 25% 20 years ago.

In most cases the wealthy pensioners can thank generous defined benefit pension schemes and boosted state pensions and allowances for their privileged position on the income scale.

The IFS is calling for the government to make pensioners shoulder some of the burden of tax cuts and austerity measures that the rest of the country is dealing with. It has put forward a number of measures, including means-testing fuel allowances and TV licences and preventing pensioners from taking the 25% tax-free lump sum on retirement.

I see where the IFS is coming from and agree that wealthy pensioners should not be in receipt of a free TV licence and heating, but it also has to take a longer-term view as the average pensioner is sure to change dramatically.

With the decline of the defined benefit scheme and rise of the defined contribution scheme, which places the onus on the individual to save, it can safely be said that future generations will not be half as wealthy as the baby-boomers that have gone before them.

As younger generations struggle to save housing deposits and pay off student loans, private pension provision has fallen to the bottom of the to-do list. The danger with the IFS' radical changes is that our current generation of pensioners will only be affected marginally – if they have already taken their 25% tax-free lump sum then they don't really care if this tax perk is stopped.

Although the IFS is trying to balance the burden between generations, and a very laudable aim it is, it has to remember that the next generation of pensioners will not be looking at a cosy retirement with three holidays a year. Future pensioners already face an uphill struggle to secure a decent retirement, we shouldn't make it any harder.

Top towns for life expectancy



More stories