Aviva Real Retirement Report finds last 12 months tough for over-55s

Article date: 9 March 2011

  • Average incomes have failed to keep track with inflation – falling 4%
  • Average mortgage debt increases by over £10,000
  • Number of people with savings pots of less than £500 jumps from 21% to 30%

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). This issue also has a focus on debt and shows how the over-55s are economising in other areas to repay what they owe. These findings are outlined in a separate press release.

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.”

-ends-

Download Aviva Real Retirement Report issue five (PDF 719KB)

If you are a journalist and would like further information, please contact:

Aviva Press Office:
Sarah Poulter: 01904 452828 / 07800 691569 / sarah.poulter@aviva.co.uk  

The Wriglesworth Consultancy:
Lee Blackwell / Ben Marquand / Emma Beresford - 020 7427 1400 / l.blackwell@wriglesworth.com

Methodology:

This report was designed and produced by Wriglesworth Research. It is a definitive look at the personal finances of the UK’s over-55 population. Not only does it look at personal wealth, income sources and expenditure patterns but also tracks how these change in the "three ages" of retirement.  

Online interviews with over 5,700 UK consumers aged over-55 between February 2010 and February 2011 provided the data for the Aviva Real Retirement Report.

Management information was provided by Aviva, with additional data provided by:

  • Department for Local Government and Communities
  • Office of National Statistics – Inflation Data
  • Halifax – House Price Index

A separate press release from Aviva’s Real Retirement Report which highlights debt issues among the over-55s also can be found at: www.headlinemoney.co.uk/

Notes to editors:

Aviva is one of the world's largest insurance groups* with 53 million customers worldwide and 46,000 employees.

Aviva’s main activities are long-term savings, fund management and general insurance, with worldwide total sales of £45.1 billion and funds under management of £379 billion*.

In the UK, Aviva takes care of its 19.2 million customers by helping them look after their future, protecting what’s important – from their health to their homes, their cars to their business – and saving for the future.

Aviva has a 10.5%** share of the UK life and pensions market and insures one in six homes and one in 10 cars in the UK. It is also one of the oldest UK insurers, with a heritage stretching back more than 300 years.

RAC, which is owned by Aviva, provides breakdown and insurance services for individuals and businesses and has around seven million customers.

Aviva is carbon neutral worldwide, and is ranked in the top 10% of socially responsible companies globally by the Dow Jones Sustainability World Index. In the UK, Aviva invested £3.8 million into local communities in 2009. Read our corporate responsibility report at www.aviva.com/cr.

Aviva’s global Street to School programme is working in partnership with Railway Children in the UK to get children living on the streets back into education and everyday life. Find out more at www.aviva.co.uk/street-to-school.

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*based on gross worldwide premiums at 31 December 2009

**Source: ABI data released August 2010

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