Pensioner incomes rise fastest

The Institute for Fiscal Studies found that pensioner incomes have risen by 29.4pc since 1999.

Pensioners have enjoyed the fastest-rising incomes over the past decade and will shoulder less of the burden of the coalition Government's tax and benefit changes than working age people, according to research published today.

The respected Institute for Fiscal Studies found that pensioner incomes have risen by 29.4pc since 1999 while those of non-pensioners have risen by just 26pc.

More than 40pc of pensioners are in the top half of the income scale now - 20 years ago, only 25pc were in that category.

In a report funded by the Nuffield Foundation, IFS researchers said state and private pensions had increased for recent retirees while tax and benefit changes under the last Labour government also benefited pensioners.

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Pensioner groups have reacted furiously to the phasing out of age-related allowances - the so-called Granny Tax - by Chancellor George Osborne.

But the IFS said that, even despite that change, pensioner households would lose less on average (£316 per year) than working-age households - with children (£1,781) or without children (£751) - from Mr Osborne's tax and benefit changes.

The IFS suggested that proposed reforms to social care, costed at £1.7 billion, could be funded by curbing entitlements to pensioners, who stand to benefit most from the reforms.

Means-testing the winter fuel allowance and free TV licences could raise £1.4 billion a year, it said, while ending tax-free lump sum pensions could raise £2.5 billion a year.

Other areas in which pensioners receive favourable treatment include paying no national insurance contributions on their earnings and the forgiveness of capital gains tax at death.

Paul Johnson, director of the IFS and a co-author of the report, said the social care reforms proposed by the Dilnot Commission would be a "coherent way forward in an area where reform is long overdue".

"Should Government choose, there are ways of raising money to pay for the changes from relatively well-off pensioners, the group which will benefit most from the proposals," he said.

"But it is important that any changes are made in the context of a clear strategy for the design of a coherent tax and benefit system that works well as a whole for both those above and those below the state pension age.

"But raising money is always painful, perhaps especially from pensioners who have little or no opportunity to increase incomes from other sources."

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