I am quite in agreement with Standard Life and their wish to have us defer more of our pay for later years when we are less fit to work.
But I challenge “friendflation” for what it assumes. “expensive nights out (32%), eating out (29%) and drinks (25%) topping the list”.
My memory of back when I was young was that people came round to mine and I went round to theirs and we ate in and did things that cost us very little but were a lot of fun.
The pinch of “friendflation” does not need be so sharp, it can be more a stroke, if you take the lead and start organising friends to come round.
See what you think – here is the article that first appeared in IFA
I must invite Mike Ambery round to my place , it’s only a few hundred houses from his offices in the Old Bailey!
Feeling the pinch of ‘friendflation’ this January? Halving your socialising spend could add £173k to your retirement pot
After the festive season splurge, January often brings a financial reality check. With many feeling the pinch and setting fresh resolutions, Standard Life analysis reveals that cutting back on costly socialising could do more than ease short-term strain – it could transform your long-term financial future by adding six figures to your retirement pot.
The term ‘friendflation’ is gaining traction as socialising costs soar, from dinners out and nights on the town to stag and hen dos and holidays with friends. New research1 from Standard Life reveals UK adults are spending an average of £375 per month on socialising, with one in six (16%) spending more money on socialising than a year ago.
While social interaction is vital for wellbeing, the financial hangover can be real. Nearly half of UK adults (46%) say they’ve regretted money spent on socialising, with expensive nights out (32%), eating out (29%) and drinks (25%) topping the list. It all adds up – a third (31%) of UK adults say that their social spending is holding them back from saving for the future.
The impact of redirecting social spend
Standard Life’s analysis2 finds that someone who began working full-time, with a salary of £25,000 a year and paid the minimum monthly auto-enrolment contributions from the age of 22, could have a total retirement fund of £210,000 by the age of 68, allowing for 2% inflation over the period. However, if someone halved their yearly socialising spend, and was able to direct this saving (£2,250) into their pension over the course of their career, they could have a final pension pot of £383,000 by the time they reach retirement – an increase of £173,000. This account allows for 2% inflation, both in the overall pension savings and the yearly socialising cost.
| Total retirement fund at age of 68* | |||||
| No additional contribution, saving from age 22 | Redirecting 10% of socialising spend (£450) into your pension, annually from age 22 – 68 | Redirecting 20% of socialising spend (£900) into your pension, annually from age 22 – 68 | Redirecting 30% of socialising spend (£1350) into your pension, annually from age 22 – 68 | Redirecting 40% of socialising spend (£1800) into your pension, annually from age 22 – 68 | Redirecting half of socialising spend (£2250) into your pension, annually from age 22 – 68 |
| £210,000 | £244,000 | £279,000 | £314,000 | £349,000 | £383,000 |
| +£34,000 | +£69,000 | +£104,000 | +£139,000 | +£173,000 | |
*assuming 3.50% salary growth per year, and 5% a year investment growth. Figures allow for 2% inflation. Annual Management Charge of 0.75% assumed. The figures are an illustration and are not guaranteed. Earning limits not applied.
Meanwhile, the analysis shows that even those who choose to redirect smaller amounts of their socialising spend into their pension could see a significant difference in retirement. For example, putting just 10% of the £4500 yearly socialising spend (£400) into pension savings over the course of a career could result in a final pension pot of £244,000 – a boost £34,000 in retirement. Increasing this to 30% of the socialising spend (£1350) could add £104,000 more to the pension pot by the time you retire (£314,000).
Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group commented:
“January is often when people take stock and set new goals, so it’s a great time to think about balance. Spending time with friends is one of life’s great joys, and it’s not something people should feel pressured to give up. But as our research shows, many people do looks back and regret certain socialising costs – whether it’s an overpriced dinner or a night out that didn’t feel worth it.
Mike’s right, let’s socialise at ours!
