Borrowing and spending up as Britain's over-55s cash in on the improving economy – Aviva Real Retirement Report

Article date: 8 October 2014

  • Aviva’s quarterly tracker (Q2 2014) shows a continuing optimism in the over-55s.
  • 43% of over-55s are confident about the economy – a post-recession high.
  • Typical monthly spend at £846 is reaching new heights – with increases seen on luxury items as well as the basics.
  • Total debt typically stands at £2,269 – one of the highest figures seen in the report series.
  • Credit cards, personal loans and overdrafts have seen hefty increases in use.
  • Property is the largest asset for the over-55s, with a house, on average, costing £253,322 – the highest the report series has seen.

Britain’s over-55s are ready to turn their backs on austerity as renewed confidence in the economy fuels higher spending and borrowing, the latest Aviva Real Retirement Report shows.

The report shows that the over-55s are beginning to save less, as their confidence grows around property prices and healthier income levels. Economic confidence is at an all time high in the report.

Rather than boosting their savings with their disposable income, the over-55s are using credit cards, personal loans and overdrafts to prop up a renewed interest in spending, particularly on luxury items.

Spending

Personal expenditure continues to climb amongst this demographic with a typical monthly spend of £846 in Q2 2014 (compared to £792 in Q2 2013), which is the highest since 2011.

This is made up of core items with the main ones being food, fuel and, for those it applies to, a mortgage. At the same time as spending is increasing, the average household shopping basket for this age group, measured by the retail prices index (RPI), continues to remain quite low.

An indication of consumer confidence can be seen in how the over-55s are increasing their spend on luxury items. These are items that are most likely to come off the shopping list in hard times – including holidays, clothing and eating out. Coincidentally, these are also some of the items that the over-55s say they will cut back on if they need to do so in retirement.

Debt

The three most prominent forms of debt for the over-55s are credit cards, personal loans and overdrafts, and the typical person in this age group owes £817 on their credit card, £765 in personal loans and £104 on their overdraft. They are also the three areas to have seen the highest increase in debt owed in this quarter, and one of the highest since tracking began in 2010.

Taking into account the slightly more unusual forms of debt such as store cards, doorstep lenders and other informal borrowing, the debt levels escalate to £2,269 for a typical person aged over-55 years. This level of debt has not been seen since late 2011 when people may have been looking to pay off debts generated prior to the 2009 economic crisis.

Saving

Savings this quarter have fallen slightly with the over-55s typically putting away £46 a month, £2 less than they did in Q1 2014.

Income

Income is also continuing to remain slightly higher in 2014 than in previous years, with the over-55s typically bringing in £1,346 a month in Q2 2014 compared to £1,212 in Q2 2013.

Homeownership

Property is by far the largest asset for this group with 61% owning their home outright and 20% owning it but with a mortgage.

The average price of a house is £253,322 – a figure that has never been higher in this report.

While regional disparities exist between incomes and the amount people tend to save, none are quite as profound as the variance in property prices seen across the UK. At £458,944, London is more than double almost any other region.

Clive Bolton, Aviva’s managing director retirement solutions, said:

“We have been seeing a return to a more optimistic outlook in the over-55s over the past year and it is now clear that this group of people are moving beyond the days of the recession to more confident times.

“While it is good to see the over-55s feel they have money to spend on their lifestyle, it is a concern that this confidence may be fuelled in part by the boom in property prices. With so many over-55s owning their own homes, it is understandable they feel they have more flexibility around their finances.

“However, we know that many people underestimate how long they are likely to live in retirement and in doing so find themselves with dwindling savings in later life. And while it is great to see the economy improving, it is really important that the over-55s do not start spending or building up debt purely based on increasing property values, because that could all change.

“People nearing or at retirement need to really match their borrowing and spending habits with their income and retirement savings, so they have budgeted for their money to last the whole of their lives.”

Download the Real Retirement Report - Autumn 2014 PDF (0.8MB)

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If you are a journalist and would like further information, please contact: Diane Mangan : Aviva Press Office : 01904 684164 : 07800 691714 : diane.mangan@aviva.co.uk

Notes to editors:

Aviva Real Retirement Report

The Aviva Real Retirement Report is produced by Aviva in consultation with ICM Research. The Real Retirement tracking survey referenced has been running since 2010 and totals 19,193 interviews amongst the population aged over 55 years. 1,202 people aged over 55-years were polled for this Q2 2014 wave of research.

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