UK: Hike in over-55s’ income gives a boost to their social lives and saving habits

A 30% increase during the last four years in the typical monthly income of Britain’s over-55s is helping revive their social lives and savings habits, the latest edition of Aviva’s Real Retirement Report shows.

The report – which has tracked personal finances among over-55s before, at and during retirement since 2010 – reveals that monthly spending on entertainment, recreation and holidays has grown by 66% from Q1 2011 to Q1 2015 as inflationary pressures on older households’ budgets have eased. The typical over-55 is also saving more than four times as much each month than they were four years ago (£75 vs. £17).

Fear over the rising cost of living, which has consistently been the number one concern when it comes to standard of living, is being challenged by concerns about the risk of serious illness and, to a lesser extent, the need to pay for care. The latter two have emerged over the last four years as the two fastest growing threats to over-55s’ living standards.

Over-55s use income gains to boost social lives and savings

  • Over-55s’ typical (median) monthly income rose 12% from £1,304 in Q4 2014 to £1,455 in Q1 2015, contributing to a total gain of 30% over the last four years from £1,115 in Q1 2011.
  • The last four years have also seen significant increases in monthly spending on essentials such as food (up 12% from £182 in Q1 2011 to £203 in Q1 2015), travel (up 33% from £28 to £37) and fuel and light (up 7% from £106 to £114).
  • At the same time, spending on entertainment, recreation and holidays has grown by 66% from £56 a month in Q1 2011 to £94 in Q1 2015. Monthly spend on eating out has also risen by 30% from £29 to £38. 
  • These trends indicate that over-55s have seized the chance to treat themselves as the pressure of inflation on their household budgets has eased.
  • Encouragingly, the typical amount saved per month increased by 53% from £49 in Q4 2014 to £75 in Q1 2015: more than four times the £17 that was typically saved each month in Q1 2011.
  • The percentage saving nothing each month has also dropped from 35% to 25% over the last four years.

Care concerns on the rise as cost of living pressures ease

  • Just 39% of over-55s were concerned about the rising cost of living in Q1 2015, down from 83% back in Q1 2011. There was a fall of 13 percentage points in Q1 2015 from the previous quarter, when 52% were worried about this issue.
  • The cost of living remains the most widely concerning threat to living standards among over-55s, followed by unexpected expenses such as household repairs (38%) and serious illness (34%).
  • The last four years have seen worries about serious illness spread rapidly from just 15% of over-55s in Q1 2011 to 34% in Q1 2015.
  • Similarly, worries over care costs are now shared by 24% of over-55s, making this their fourth most pressing concern. This is a major contrast to Q1 2011 when just 3% were concerned and it ranked 11th compared to other threats to living standards.
  • Concerns over falling returns on savings have dropped from 30% in Q1 2011 to 20% in Q1 2015 – suggesting that over-55s have adjusted their expectations after six years where the Bank of England’s Base Rate has been held at 0.5%.

Table 1: Worries about threats to standard of living in the next five years

      Q1 2011    Q4 2014    Q1 2015  
Rising cost of living  83% (1st) 52%(1st) 39% (1st)
Unexpected expenses (e.g. major repairs to home) 39% (2nd) 38% (2nd) 38% (2nd)
Serious illness (for me or my partner) 15% (6th) 29% (3rd) 34% (3rd)

Need to pay for care for me or my partner (e.g. care assistance in my own home or move into residential care home)

3% (11th) 19% (5th) 24% (4th)
Falling return on savings 30% (3rd) 19% (5th) 20% (5th)
Death of my partner 7% (9th) 17% (7th) 20% (5th)
Rising inflation/state of the economy n/a 26% (4th) 19% (6th)

Clive Bolton, Managing Director, Retirement Solutions, Aviva UK Life, said:

“Income gains mean that many over-55s can finally afford more room to breathe in their monthly budgets than was possible during the slow climb out of recession. The freedom to spend more on leisure pursuits will feel even sweeter for having had to adjust to an extended period of living under a dark financial cloud.

“Things are certainly looking up in the short-term, but it is important not to forget the bigger picture too. It is hugely encouraging that people are using some of their extra income to step up their efforts to save, as well as adding enjoyment to their lives.

“It is very easy for people to underestimate how long retirement pots needs to last, and it takes a careful balancing act to plan for the future as well as enjoying the here-and-now. Care costs are often the great unknown, but making efforts to grow their savings pots will leave people in a better position to cope if this need arises.”

Download the Real Retirement Report PDF (6.3Mb)

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The Real Retirement Report is designed and produced by Aviva in consultation with ICM Research. The tracking series referenced above has been running since 2010 and totals 23,336 interviews among the population over the age of 55 years. For the latest wave of tracking data (Q1 2015), 1,733 people over the age of 55 were interviewed. All monetary amounts have been rounded to the nearest £1, therefore percentage changes may not tally exactly in some instances.

Technical note

  • A median is described as the numeric value separating the upper half of a sample, a population, or a probability distribution, from the lower half. Thus for this report, the median is the person who is the utter middle of a sample. All figures in this release are medians unless otherwise specified and are referred to as ‘typical’ rather than ‘average’ (mean).
  • A mean is a single value that is meant to typify a list of values. This is derived by adding all the values on a list together and then dividing by the number of items on said list. This can be skewed by particularly high or low values.

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