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Tuesday, 23 September 2014

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Over-55s see value in their homes but little in savings

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.

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Equity: Older members of the population have more value in their homes than other sections of society, but average savings are down

The report demonstrates the financial pressures faced by the UK’s three ages of retirement (55-64, 65-74, and 75 or over).

Average monthly income for the over-55s has risen in the last quarter from £1,216 (September 2011) to £1,285 (December 2011) but is down four per cent from £1,335 in December 2010. And with year-on-year inflation running at over five per cent 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 per cent December 2011 compared to 61 per cent 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 per cent January 2010 to 22 per cent December 2011). This indicates more people are now working longer, which is possibly a reaction to the fall in real incomes.

The typical person over 55 now has £11,153 in savings and investments, which is 27 per cent lower than in 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 with the number of non-savers hitting its lowest level for two years (41 per cent December 2010 compared to 36 per cent December 2011).

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), down from £84,985 in March 2011.

The average house owned by the over-55s is worth £238,284 (December 2011), which is 46 per cent 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 (75 and over) have the highest average equity (£262,508).

While the average amount the over-55s have in savings is down, this is partly due to the fact that more people are now starting to save. However, with income levels falling and inflation rising, it is going to make it difficult for some to maintain their standard of living.

The importance of planning for your income in retirement cannot be stressed enough, and the earlier you begin the more you will potentially boost your financial security in the long-term.

  • This article should not be relied upon when making investment decisions. Always obtain financial advice.

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