The income gap between the richest and poorest pensioners is wider than ever before, a new report reveals.

PENSIONS IN CRISIS

75% of final salary schemes will close within five years (Hermes) Only a fifth of people under 34 are concerned about their future retirement (Mercer) People from ethnic minorities are at higher risk of pensioner poverty (Pensions Minister)

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The best-off pensioners are doing better than in the past, often thanks to lucrative private and occupational pensions.

But those at the other end of the retirement income scale, who rely solely on state benefits, are worse off than in 1979, according to the Pensions Landscape report from the Pensions Policy Institute.

And it says that the gap between rich and poor pensioners is wider than ever.

The report says that in 1979 the income of the richest 20% of pensioners was, on average, more than 73% of the average national wage.

And by 2001, they enjoyed an income in excess of 81% of average national earnings.

But while that group has seen its income increase, the position for the bottom fifth of pensioners has worsened since.

Their income was 23% of average earnings in 1979 but by 2000/01 it had fallen to just 21%.

That means the income gap between 'have' and 'have not' pensioners has grown from 50% of national average earnings since 1979 to 66% in 2000/01.

Further falls

The report says that, typically, the poorest pensioners are women, people from ethnic minorities and those who have been self-employed.

And it concludes that that both the state and employers are reducing their long-term pension commitment.

The report's authors add that current individual pension saving is not enough to make up the shortfall.

As a result, incomes for pensioners could fall even further.

State shortfall

In addition, the reports authors warn that three quarters of today's workers are destined to end up on means-tested benefits when they retire.

It points out that new means-tested benefits for the poorest pensioners go up every year in line with earnings.

But state pensions rise more slowly, in line with prices, and by the time younger workers retire the means-tested benefits will be worth more than the basic pension.

"The Government must review the role of the basic state pension to ensure it remains the foundation of retirement income," said Gordon Lishman, director-general of Age Concern England.

"The basic state pension, now worth 15% of male average earnings, is expected to be worth as little as 7% by 2050."