Older People Feeling the Economic Pinch

The latest edition of Aviva’s Real Retirement Report, which reviews the finances of the UK’s over-55s, finds that older people are feeling the economic pinch.  Over the past year average incomes have fallen by 4 per cent, average mortgage debt has risen by over £10,000, and the number of households with savings of less than £500 has jumped from 21 per cent to 30 per cent.

Since February 2010, the mean monthly income of the over-55 households not only failed to keep track with inflation, which rose by 5 per cent, but actually fell by 4 per cent from £1,284 to £1,236.

Aviva’s quarterly report, based on interviews with more than 5,700 people aged 55 and over, 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). The latest issue also has a focus on debt and shows how the over-55s are economising in other areas to repay what they owe.

Out of the age groups tracked, the long-term retired (over 75) saw the most significant dip in their mean monthly income (£1,136 to £1,057) followed by the pre-retirees (55-64) whose mean monthly income fell 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 per cent (February 2010) to 20 per cent (February 2011), which, the report suggest, indicates that the economic turmoil has hit the “middle earners” rather than low income earners. 

While the number of over-55s who own their own home (either with a mortgage or outright) only fell by one percentage point to 80 per cent in February 2011, the average mortgage debt rose to £65,107 (February 2011) from £54,567 (February 2010).

The report highlights 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 per cent to 43 per cent) with the number of over-55s with savings of under £500 rising from one in five (21 per cent in February 2010) to almost one in three (30 per cent in February 2011).

In addition, the proportion of those with no savings at all has risen over the past year to 20 per cent, an increase of  4 per cent.  The problem is worse amongst the pre-retirees group (55-64 year olds) where just over a quarter (26 per cent) have no savings.

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