Incomes fall, debts rise and savings drop as over-55s struggle

The UK’s over-55s have seen incomes fall, savings drop and debts rise as they struggle to meet the rising cost of living, reveals Aviva’s latest Real Retirement Report.

This report – which is the seventh in the series – highlights the financial challenges that the three ages of retirement (55-54; 65-74 and over-75) face.

Incomes fall:

Typical monthly income for UK over-55s has fallen to £1,216 (Sep 2011) from £1,294 (June 2011). This is not only lower than the last quarter but also the lowest monthly income recorded since the first Real Retirement Report in February 2010 (£1,250).

The over-75s (£999) have the lowest monthly income followed by those aged 65-74 (£1,314) and those aged 55 – 64 (£1,230). In addition, almost a quarter (23%) of over-55s now survive on less than £750 per month.

Savings drop:

Over-55s typically have £10,468 in savings which is 12% lower than last quarter (£11,907 – June 2011) – a clear indication that not only are some people not saving but they are in fact dipping into their savings.

With 73% of over-55s worried about the rising cost of living, it is interesting to note that a quarter now have less than £500 in savings.

Pre-retirees (55-64 years old) who are more likely to be economically active are most likely (29%) to be in this situation followed by the retiring (65 – 74 years old – 21%) and long-term retired (over 75 years old -19%).

The fact that pre-retirees have very low savings is unsurprising as 46% are saving nothing each month (retiring – 36% and long-term retired – 26%).

Debts increase:

While the majority of over-55s are not in debt, those who are, typically owe £20,001 which is up from £17,112 (May 2011).

This is a substantial increase and likely to be attributable to people using borrowing to meet seasonal costs such as holidays, increased day-to-day living expenses or unexpected bills.

It is interesting to note that while there is a drop in typical debt for all over-55s between the ages of 55-64 (£2,471) and 65-74 (£1,864), it increases marginally amongst the over-75s (£1,970).

This ‘bounce’ is also apparent when you look at types of debt – for example, just 12% of the retiring have an overdraft but 19% of the long-term retired use this type of borrowing.

Clive Bolton, ‘at retirement’ director at Aviva said:

“The over-55s have seen their finances deteriorate over the last quarter as people struggle to keep up with the rising cost of living on a relatively fixed income.

“That almost a quarter of this age group have less than £500 in savings and 40% save nothing each month is a clear indication that this age group is struggling financially.

“While there is a limited amount that the long-term retired can do to improve their finances, these figures highlight the importance of a lifetime approach to retirement planning.

“Taking out a private pension, building up a respectable savings pot and paying down debt are all simple steps that people can take to ensure they don’t face these problems in retirement.”

Source: www.myintroducer.com