Aviva’s fifth quarterly Real Retirement Report, which reviews the finances of the UK’s over-55s, finds that over the last year, average incomes have fallen by 4%, mortgage debt has risen by over £10,000, and the number of households with savings pots of less than £500 has jumped from 21% to 30%.
The quarterly report reviews the finances of the three different ages of retirement – pre-retirees (aged 55-64); retiring (65-74); and long-term retired (75 and over).
Summary of financial changes for the over-55s in last 12 months
| Expenditure | Feb-10 | Feb-11 |
| Mean monthly income | £1,284 | £1,236 |
| % with a monthly income of less than £750 | 21% | 20% |
| Median savings pot | £11,590 | £11,427 |
| Mean house price | £232,985 | £235,590 |
| Mean mortgage debt | £54,567 | £65,107 |
| Mean amount saved each month | £127 | £133 |
| % of people with savings pots of less than £500 | 21% | 30% |
| % of people saving nothing each month | 39% | 43% |
Change in incomes
Since the new Coalition Government came to power in May 2010 it has made a raft of changes in order to address the deficit, some of which have had an impact on the finances of the over-55s. Since February 2010, the mean monthly income of the over-55 households failed to keep track with inflation (+5%) and fell by 4% from £1,284 to £1,236.
Out of the age groups tracked, the long-term retired (over 75) saw the most significant dip (£1,136 to £1,057) followed by the pre-retirees (55-64) who saw their income fall to £1,361 (February 2011) from £1,433 (February 2010). The income of the retiring (65-74) remained relatively stable at £1,385 (February 2010) and £1,386 (February 2011). Despite this, the percentage of over-55s whose monthly income is less than £750 has fallen only marginally from 21% (February 2010) to 20% (February 2011), suggesting that the economic turmoil has hit the “middle earners” rather than low income earners.
Mortgage debt increasing
While the number of over-55s who own their own home (either with a mortgage or outright) has only fallen by one percentage point to 80% (February 2011), the average mortgage debt has risen to £65,107 (February 2011) from £54,567 (February 2010). This might indicate that the recent economic turmoil has badly affected some over-55s’ abilities to repay. It could also suggest that we may see more people taking mortgage debt into retirement in the future.
Negative impact on savings
The impact of rising inflation on the cost of living has also impacted on people’s ability and willingness to save. There has been an increase in the percentage of people saving nothing each month (up from 39% to 43%) with the number of over-55s with savings pots of under £500 rising from one in five (21% February 2010) to almost one in three (30% February 2011).
Spending on necessities
As incomes failed to keep pace with inflation, over-55s have cut back spending, not just on luxuries but also necessities. Spending on entertainment, recreation and holidays fell by five percentage points from 12% (February 2010) to 7% (February 2011). In addition, while food prices rose 5.88% over the period, spending on these items fell from 24% (February 2010) to 17% (February 2011) as people chose to cut down on their weekly spending. Any money saved was quickly put towards increases in the cost of housing (+5% points to 21% – February 2011) and public/private transport (+4% points to 11% – February 2011).
Clive Bolton, ‘at retirement’ director at Aviva said: “The fifth Real Retirement Report provides a valuable opportunity to look back at how the finances of the over-55s have changed over the last 12 months. The picture it reveals is concerning, as while incomes have fallen and savings pots grown smaller, mortgage debt has increased and inflation has hit key expenditure pressure points.
“However, this age group is slightly more optimistic than they were about the rising cost of living over the next five years than they were in 2010, possibly because they have experience of living through a recession in the past. And with the UK economy showing some signs of recovery, the future is brighter than it might appear.”
Source : Aviva Press Release
