The report examines the financial pressures faced by the UK’s three ages of retirement: 55-64s (pre-retirees), 65-74s (the retiring) and over-75s (the long-term retired).
Average monthly income for the over-55s has increased by just £109 in the last two years (from £1,335 – Q4 2010 to £1,444 – Q4 2012). The retiring have driven this trend, gaining £166 overall, while monthly incomes have risen a mere £9 for pre-retirees and fallen by just £1 for the long-term retired.
The income boost for the retiring has been driven by more people working past the Default Retirement Age, which was phased out in 2011. Since the Real Retirement Report launched three years ago, the percentage of this age group who list wages as part of their income has risen from 18% to 23% (Q4 2012).
The report also shows the growing importance of workplace benefits in retirement. With the effects of auto-enrolment yet to kick in for future generations, people aged 65-74 (47%) are still more likely to draw income from an employer pension than those aged 75 and over (37%).
Monthly spending by the UK’s over-55s has actually fallen in the last year, despite annual inflation of 2.74% (Q4 2012), with average outgoings of £1,231 in Q4 2012 down from £1,269 in Q3 2012 and £1,300 in Q4 2011.
The typical over-55 has cut back on non-essential items and prioritised debt repayment, travel, and fuel and light. Spending on entertainment, recreation and holidays has fallen by 19% in the last quarter, while clothing and footwear has dropped by 13% and leisure goods by 10%. Meanwhile, spending on debt repayment has increased by 8% and almost matches monthly food bills (£177.58 compared with £189.45).
The average saving pot for over-55s has fallen by almost £4,000 in the last quarter (£14,544 – Q4 2012 compared with £18,364 – Q3 2012). This remains larger than a year ago (£11,153 – Q4 2011), but while pre-retirees’ savings have reached their highest level since the report began, total savings have decreased among the two older age groups, both in the last quarter and in the last two years.
The need for the long-term retired to dip into their savings to maintain their standard of living has seen the percentage with less than £2,000 saved grow from 23% (Q3 2012) to 30% (Q4 2012).
The amount retirees save is also down by 28% from Q1 2012 although they have increased marginally year-on-year (up 7% in Q4 2012 compared to Q4 2011). The typical over-55 puts away just £28.67 or 1.99% of their monthly income: a mere £1.77 more than the same time last year.
Clive Bolton, managing director of Aviva’s At Retirement business, said: “Whether it’s through choice or necessity, the fact that people are working for longer shows how vital it is to work hard to achieve financial stability, so you can enjoy your retirement without the constant worry about making ends meet.
“The growth of income among the retiring population is a clear sign they are taking the opportunity to prepare for the future, and prioritise their outgoings to clear existing debts. And while the long-term retired may find their savings dwindle in retirement, it’s important to remember that, with the right advice, there are often alternative ways to cope with rising living expenses and unforeseen costs.”
Stephen Dilworth, UK membership director of Foresters, added: “The UK’s retirees provide invaluable support for not only their families but also charities and other voluntary organizations across the UK. Indeed, they provide millions of hours of unpaid work every week, and this is even more impressive considering the current economic climate.
“Of course, undertaking some kind of voluntary work (such as helping out in a local charity shop or teaching children to read) can be beneficial not only for the recipient but for the giver as well. For many of those who are now retired, volunteering is a fantastic way of learning new skills, meeting new people and remaining active, as well as providing the brilliant feeling that you have been able to give back to your community and make a difference.
“Here at Foresters, we fully understand the importance of the unpaid work undertaken by local volunteers, and the difference it can make to a community. That’s why we do our very best to support all of our members with benefits such as scholarships, helplines and community support, as well as the opportunity to get involved with volunteering schemes and other charitable work.”