UK: Aviva Real Retirement Report - uncertain economic outlook sees over-55s cutting debt and boosting savings

• Average over-55s income increased 0.65% in past year – but inflation rose 4.7%
• 73% fear the impact of the rising cost of living over the next six months

Aviva’s latest quarterly Real Retirement Report, which monitors the finances of the UK’s over-55s, has found the marginal growth in income over the last year of 0.65% has been outstripped by a rise in "grey" inflation of 4.7%. However, the over-55s have started to prioritise debt repayment and saving as their income is squeezed by inflation.

The report which tracks the finances of the three different ages of retirement – pre-retirees (aged 55-64); retiring (65-74); and the long-term retired (75 and over) – also includes a focus on the final 10 years of employment before retirement which highlights the importance of saving.

Falling debts:
The mean debt of those over-55s with debt has fallen from £19,878 (February 2011) to £17,112 (May 2011) as people look to repay their borrowing. Overall, the average amount owed on credit cards has fallen from £3,311 (February 2011) to £2,973 (May 2011), personal loans from £5,983 to £5,569, overdrafts from £2,202 to £988, store cards from £1,220 to £831, and hire purchase from £1,998 to £1,169.  

Savings creep up:
The number of over-55s who are saving each month has risen from 57% (February 2011) to 59% (May 2011) and the median amount saved has risen from £27.23 (February 2011) to £32.94 (May 2011) as people seek to boost their financial security.    

More secure about the future:
Despite the country’s economic difficulties and perhaps because they are adjusting to the new financial environment, over-55s are feeling more secure about the future. Indeed, the number of over-55s who were worried about the rising cost of living over the next six months has actually fallen from 83% (February 2011) to 73% (May 2011).

Drop in real income:
Adjusted inflation rose 4.7% for the UK’s over-55s in the last 12 months, more than cancelling out the slight increase in average monthly incomes of 0.65% from £1,239 to £1,247 over the last year. The most severely affected by this are the long-term retired (over-75s) who have seen their income fall from £1,416 (May 2010) to £1,178 (May 2011).

The income of the retiring (65-74) has increased from £1,360 (May 2010) to £1,426 (May 2011), and the income of pre-retirees (55-64) dipped marginally from £1,352 (May 2010) to £1,324 (May 2011). The percentage of over-55s who survive on a monthly income of less than £750 remains relatively steady at 21% (May 2011) compared to 22% in May 2010.

Clive Bolton, ‘at retirement’ director at Aviva said: “The sixth Real Retirement Report has found the over-55s under pressure from the rising cost of living. While incomes have increased slightly, this has been negated by adjusted inflation of 4.7%.

“With changes to pensions and the threat of unemployment causing concern among the over-55s, it is encouraging to see a picture emerging of a group showing determination to tackle this by paying down outstanding debts and boosting regular savings.

“The rising cost of living has caused people to adapt their spending habits and to prioritise their income in retirement, but taking control is helping to reduce their fears about a slow economic recovery and its impact on their finances in retirement.”

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 6,700 UK consumers aged over-55 between February 2010 and May 2011 provided the data for the series of Aviva Real Retirement Reports.

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
• Aviva – Family Finances Report
• Saga – Cost of Care.

A separate press release from Aviva’s Real Retirement Report which highlights issues among the over-55s with their last 10 years of employment before retirement also can be found at: www.headlinemoney.co.uk

Download The Aviva Real Retirement Report: Issue Six - June 2011 (PDF 678KB)

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

Aviva Press Office:
Tom Wilson
078 0069 2053
tom.wilson@aviva.co.uk

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

Notes to editors: 
Aviva is the world’s sixth largest* insurance group. We provide more than 53 million customers with insurance, savings and investment products with total worldwide sales in 2010 of £47.1 billion**.

We are the UK’s largest insurer with 19 million customers and one in three households has a relationship with us. Our combination of life, health and general insurance, together with motoring services from RAC, is unique in its scale and breadth in the UK market.  Customers can choose to buy our products through intermediaries, our corporate partners or from Aviva direct and we have become the partner of choice for many of the UK’s biggest organisations. 

We are ranked as one of the UK’s top ten most valuable brands and Aviva plc are in the top 10% of socially responsible companies globally in the Dow Jones Sustainability World Index. In 2010 we invested £4.3 million into our communities in the UK, which included 1,500 Aviva volunteers giving 24,000 hours for good causes. In addition, our employees gave £600,000 through fundraising and donating. Read our corporate responsibility report at www.aviva.com/2010cr.

Aviva is working in partnership with Railway Children through the Aviva Street to School programme to get children living or working on UK streets back into 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.
** at 31 December 2010.