ONS data reveal occupational pensions reduce retirement poverty

The data also highlight growing income inequality in retirement, however, with those in the top 20% of earners enjoying incomes that are about four times that of those in the bottom 20%.

The new data from the Office for National Statistics come amid debate about the role of the state in providing retirement income.

“Workplace pensions and better state pension provision are essential to help people save more for retirement and avoid the poverty trap that many elderly are now facing,” said Joanne Segars, chief executive of the National Association of Pensions. She urged the government not to delay the automatic enrolment scheme.

In 1977, retired households made up the single largest proportion of households in the lowest fifth of income earners, at 56% of the total. By 2008-09, this had fallen to 38% of households in the bottom fifth of earners.

The impact of occupational pensions becomes most clear in the middle – or third – quintile. Only 9% of this group were retired households in 1977; by 2008-09 this had grown to 29%.

Looked at another way, retired households living in poverty – those on less than 60% of average income after deducting housing costs – fell from 2.8m in 1999-2000 to 1.8m in 2008-09.

And while the state pension in 1977 was worth about three times the average income from occupational pensions, by 2008-09 the average income retired households received from occupational pensions and annuities quadrupled and was almost equal to benefits from state pensions before pension credit was included.

But the data also point to growing inequality among pensioner households. In 2008-09, pensioner couples in the top fifth of retiree households measured by income earned an average £755 a week compared with £197 for couples in the bottom fifth of incomes.

Steve Webb, pensions minister, said: “We know that the gap between the poorest and wealthiest pensioners comes primarily from a lack of income from private pensions or investments.”