Pensioners and the poor feeling the full impact of the recession


Rich households, poorer groups and pensioners have seen their incomes decline the most over the past three years.

Previous tax changes have meant that the poor and the rich have been particularly affected in terms of income and earnings.

The poorest and richest households have been worst hit by the recession, according to a study by the BBC and the Institute for Fiscal Studies (IFS).

Average incomes across the whole of the country fell by 1.6% every year between 2008 and 2011. In contrast, median incomes rose by 1.6% per year in the previous 50 years.

The research outlined that the loss of employment during the recession and lower interest earnings on savings were the reasons behind the falling income levels. The failure of wages to rise in line with inflation was cited as another cause.

Poor households saw their income fall by 2.1% in the previous three years, which equates to a fall of £182 a year- prior to the financial crisis they may have expected their annual income to rise by £428. Pensioners saw their average income drop by £465 a year where as in earlier years they may have experienced a £858 rise.

The richest saw their income fall by 3.8% – the largest decline across the board – marking an annual fall of £2,230. However, this group was in a better position to cope with the changes than poorer families.

Both the poorest and the richest saw their income decline as a result of the changes made to the tax and benefit system in the last three years.