A new report looking the the finances of the older generation has found that many in the over-75 age bracket are living off their savings or credit card in order to meet day to day expenses. The report uncovered data showing that the average savings of someone aged over 75 has fallen to just £12,000, down from £22,500 just two years ago. High inflation, record low interest rates and the rising cost of living are the main reasons why many are having to dip into their savings just to survive. Another concern the report found was that around 25% of over 75′s had a credit card debt that they did not repay in full in each month. The report found that the average person’s credit card debt was 128% of their monthly income, with the average amount outstanding being £1,689. With many over 75′s living on fixed incomes it can be very difficult to reduce the amount owed on a credit card, especially as prices for day to day items are rising. Although inflation has fallen back recently to below the 3% mark, it had been running at above 5% pushing up the price of essential items. Campaign group for the over 50′s SAGA estimate that the cost of living for older people has risen by 20% since 2007.
Joanne Segars who is the CEO of the National Association of Pension Funds (NAPF) says the problem is so bad that the UK was effectively “…sleep walking into a crisis when it comes to old age. We have to get more people saving into a workplace pension from as early as possible, and a simpler, more generous state pension will also help.” Over 50′s have been hit not only by rocketing prices for food, fuel and energy but have also suffered from poor returns on their savings and pensions. It is estimated that the average pension has earned just £1.36 on every £100 saved since 2007. Moreover once someone has retired the amount of money they can gain from their pension fund through an annuity has also fallen dramatically, partly due to the latest round of Quantitative Easing from the Bank of England. According to the MGM Advantage Annuity Index, average annuity rates have fallen by 14% since June 2009 leaving thousands of retirees financially worse off as a consequence. Other forms of savings, such as traditional savings accounts or ISA’s have also performed badly due to interest rates remaining low. Many over 55′s are now seemingly put off saving completely as the report found that more than four in 10 people questioned are not saving anything at all each month.
The report identified the over 75′s age group as being one of the worse hit because those in this age bracket simply do not have the options or means to increase their income in the way younger over 55′s did. For example those in their 50′s and 60′s can choose to delay their retirement in order to build up a larger pension fund whereas those already retired have no option but to dip into their savings. Another recent report conducted by SAGA found that money worries were now of greater concern than crime or health for those aged over 50. Dr Ros Altmann who is Director General says that…”…older people are desperately struggling with the cost of living. We need to squash on the head this idea that pensioner benefits should be means-tested. They have been hit hard.”
Although the picture is pretty bleak for those aged over 75, the report did find that over 55s in general are were marginally better off compared to 12 months ago. They found that average savings had risen to £15,756 up from £13,900 two years ago, but this was only because people had been working past their normal retirement aged in order to build up a larger fund. Also many of those who have taken a tax-free cash lump sum from an annuity have saved the money rather than made any expensive, big ticket purchases.