Not much fun for the over 55’s

Great stuff from Aviva

07 December, 2011

  • Savings pots fall 27% since December 2010
  • Average annual income down 4% and inflation up 5.4% since December 2010
  • Equity in property now eight times the size of the average pension pot

Despite a quarter on quarter rise in income and savings, the UK’s over-55s are now significantly poorer than they were 12 months ago, reveals Aviva’s latest Real Retirement Report. The report, the eighth in the series, demonstrates the financial pressures faced by the UK’s three ages of retirement (55-64, 65-74, and over-75).

Income slides:

Average income for the over-55s has risen in the last quarter from £1,216 (September 2011) to £1,285 (December 2011) but is down 4% from £1,335 this time last year. And with year-on-year inflation running at 5.4% this actually means the over-55s are even worse off.

At the same time there has been a decrease in the number of over-55s claiming a State Pension (57% December 2011 compared to 61% in March 2011), and an increase in the number of 65-74 year olds who derive an income from wages and earned income (from 18% January 2010 to 22% December 2011). This indicates more people are now working longer, which is possibly a reaction to the fall in real incomes.

Savings plunge:

The typical person over 55 now has £11,153 in savings and investments, which is 27% lower than December 2010 when the average was £15,262. This is partly because more people have found themselves dipping into funds to top up their income in order to meet day-to-day costs.

But, it is also due to the fact that more people have started saving (the latest figures show the number of over 55s with no savings has fallen from 16% (December 2010) to 15% December 2011) and the number of non-savers has hit its lowest level for two years (41% December 2010 compared to 36% December 2011).

Debts growing:

The average unsecured debts of the over-55s have increased to £21,901 (December 2011) from £19,878 in March 2011. However, the total debt of those with mortgages and other debts is £80,849 (December 2011), which is down from £84,985 in March 2011.

At present, the most common type of borrowing is credit cards (39% of over-55s have one on average), followed by personal loans (23%), overdrafts (20%), and hire purchase (14%). Borrowing on these products has increased since last quarter, with the exception of the over-75s who now have fewer hire purchase agreements (11% December 2011 compared to 12% September 2011).

Percentage of over-55s who hold unsecured borrowing products (December 2011):

  55-64 65-74 Over 75
Credit cards 43% 36% 34%
Personal loans 26% 19% 17%
Hire purchase 16% 10% 11%
Overdraft 23% 14% 20%

Source: Aviva

Property wealth:

The average house owned by the over-55s is worth £238,284 (December 2011), which is 46% more valuable than the average UK home (£163,311*). And the average amount of equity stands at £223,112 (December 2011). Of the three age groups the long-term retired (over 75) have the highest average equity (£262,508).

With the typical pension pot standing at £26,940, this means the over-55s have more than eight times as much equity in their homes as they do in formal retirement savings. This adds weight to the case for equity release, and with today’s pre-retirees (55-64) being less prepared than the preceding generations (see separate press release); it is likely we will see a more widespread take-up of equity release in the future.

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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