Article date: 8 December 2010
Aviva research shows nearly three quarters of over-55s are worried about the rising cost of living causing them to review their spending habits.
Aviva’s quarterly Real Retirement Report published today shows there has been a significant increase in over-55s’ fears about the rising cost of living. Three quarters (74%) said that this was their biggest fear over the next six months and 70% over the next five years. The research shows that this age group is concerned about the austerity measures outlined in the Autumn Comprehensive Spending Review and the imminent increases in VAT.
All the following findings are revealed in today’s quarterly report from Aviva which reviews the finances of the three ages of retirement - pre-retirees (55-64); retiring (65-74) and long-term retired (75 and over). This report also takes a detailed look at the increasing tendency for over-55s to down-shift careers. This is outlined in a separate news release.
Finances being squeezed
Whilst the over-55s’ biggest fear is the rising cost of living (74%), over the next six months, they are also concerned about the falling return on savings (35%), unexpected expenses (36%) and an increase in taxes (26%). The financial concerns of this age group centre on the fear that their already squeezed incomes will fall further and they will be forced to pay for additional expenses out of this money.
The significant increase in the number of over-55s fearing the rising cost of living over the next five years (up 52 percentage points from May 2010 to 70%) really underlines how the fallout from the recent economic turmoil and the Government’s move away from a welfare state has impacted on this age group’s hopes and fears. It also reflects the growing fear that high levels of inflation will continue to erode the over-55s’ purchasing power.
Housing is largest expense:
Housing (mortgage or rent) now makes up the largest share of the over-55s’ monthly outgoings, accounting for 18% of total expenditure (compared to 14% in September 2010). This is likely to be due to a variety of reasons, from landlords increasing rents, to people choosing to pay down their mortgage in the current low interest environment.
While spending on housing increased from last quarter, spending on food fell to 16% of total outgoings. There was some indication that people were economising in other areas in order to repay their debts. Indeed, there was an increase in the level of debt repayment as a share of monthly spending, up to 11% in December 2010 from 7% in September 2010. However, while over-55s have chosen to economise on food over the past quarter, this figure may increase in January 2011 when the planned VAT increase hits some foodstuffs.
Clive Bolton, ‘at retirement’ director at Aviva, said: “Over the last six months, we have seen a significant increase in the number of over-55s who are worried about the rising cost of living. Inflationary pressures have become stronger over this period, whilst interest rates have remained at historically low levels. The Government’s Emergency Budget and Autumn Comprehensive Spending Review have also left this age group feeling nervous that they will receive less support from the State. However, we have seen the over-55s make steps to adjust their spending accordingly, which is encouraging.
“At Aviva, we are also doing our best to ensure that individuals have the right retirement solutions available to them so they are able to relax and enjoy their later years, safe in the knowledge that their finances are working hard for them. This is why we have developed a range of savings and investment solutions, as well as financial planning tools, to help people plan a retirement that suits their own personal needs.”
Download a full copy of Aviva’s Real Retirement Report (PDF 863KB).
If you are a journalist and would like further information, please contact:
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Management information was provided by Aviva and the remaining data was sourced from the Aviva Real Retirement Index which used findings from over 2,400 over 55s. This report 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.
In addition to the regular data, each quarter a spotlight will be shone onto a different relevant topic with career down-shifting being the choice for December 2010. A press release highlighting the other key points from Aviva’s Real Retirement Report 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