Average incomes in the UK are set to rise faster than inflation this year, after falling by around five per cent in real terms following the 2008 financial crash, according to new research by a respected economic think tank.

The Institute for Fiscal Studies said that the median average income will rise by 3.1 per cent to £459 a week - £23,868 a year - in the 2014-15 financial year, outstripping CPI inflation by 1.2 per centage points, with a similar rise predicted for year 2015-16.

This means that by 2015-16, average household incomes will be back at 2010 levels but still three per cent below 2007, taking inflation into account.

The picture is less rosy when the less-favoured RPI measure of inflation is used, with incomes remaining virtually static in real terms over the coming years.

But the report found that the rise in average real-terms incomes will not be sufficient to prevent an increase in poverty, with an additional 900,000 children and 900,000 working-age non-parents falling into absolute poverty between 2012-13 and 2020-21.

The report repeated earlier warnings from the IFS that "it does not seem possible under current policy" for the Government to meet its legally-binding target to bring the number of children in absolute poverty below five per cent and the number in relative poverty below 10 per cent by 2020-21.

The IFS projections that 24.5 per cent of children (3.5 million) will be in absolute poverty and 20.9 per cent (3 million) in relative poverty in 2020-21 are slightly less bleak than in a similar study earlier this year, when the figures stood at 27.9 per cent and 22.5 per cent respectively.