Over-55s Raiding Retirement Savings

Unexpected expenses are forcing over-55s to dip into savings that would otherwise have been used for retirement income, according to Aviva Insurance’s latest quarterly Real Retirement Report.

This quarterly report reviews the finances of the three ages of retirement: pre-retirees (55-64); retiring (65-74) and long-term retired (75 and over).

Over the last five years, nine out of ten (92 per cent) of over-55s have faced  unexpected expenses which have had to be met out of savings that would otherwise have been used for retirement income.  Nearly half (45 per cent) had dipped into emergency savings funds, 25 per cent had used income-generating savings, 17 per cent had cut back on expenditure in other areas, 11 per cent had taken out a credit card and 6 per cent had sold assets to meet the costs.

The uppermost concern over the next five years for nearly two-thirds (64 per cent) of those over 55 were fears about the rising cost of living. This represents a significant increase from the last report (18 per cent in May 2010) and Aviva says, underlines how the fallout from the recent economic turmoil and the current environment of Government cost savings have impacted on this age group’s hopes and fears.   

With the rising cost of living being this age group’s primary concern it is perhaps no surprise that  just under two thirds (61 per cent)  were also worried about how they will pay for unexpected expenses of £500 or more. The report shows that despite the large number of over-55s having had to pay out for unexpected expenses, over half (55 per cent) have not made any provision for these unplanned outlays. Indeed, only 6 per cent have made any provision for long term care, 9 per cent for private medical care and 23 per cent for the upkeep of their homes.  

A major issue is how ongoing low interest rates are impacting savers.  With 12 per cent of over-55s’ income coming from a pot of savings and investments worth on average £16,296, the fact that the Bank of England base rate continues to remain at a historic low is a real concern for many people.

Clive Bolton, from Aviva, commented:

“Over the last 30 years, people have generally seen retirement as an opportunity to relax after a long working life and enjoy the fruits of their labour. However, when you consider that for a savings pot of £16,296, you would get an annual gross income of just £117 from the standard branch based notice account, you can understand why many over-55s are very worried about their finances. In fact these figures reveal that one in five over-55 households is struggling to get by on almost a third of the national average income. 

“Retirement income is also relatively fixed which is why any rise in the cost of living is particularly concerning for this age group. This coupled with the fact that people often have to pay for unexpected expenses for which they have made no provision highlights how vitally important it is to build up retirement savings over your entire life.”

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