New research has shown that around 40% of those approaching retirement have not saved anything for the future, with many having significant levels of personal debt. The research was carried out by one of the UK largest insurers Aviva, who carried out analysis on three groups – those aged 55 to 64, those from 65 to 74 and those over age 75. They have uncovered that those in the first age group, 55 to 64, are generally much worse off than those who have already settled into retirement. The data illustrates the deep divide in UK society with some having to live on less than £750 per month, almost 20% in fact.
They found that of those aged 55 to 64 on average they had saved £57,002 which is an adequate amount by most people’s standards. However this figure was somewhat “misleading” once you drilled further down into the data. This finds that the “median or typical amount of savings” is much lower at £8,593. Part of the reason for the misleading headline number of £57K is due to the existence of “savings of a small number of rich people are disguising the relative poverty of a large minority“. It should also be noted that of this first age group, over 25% still have a mortgage and an average debt of £52,535,.
When you compare the income across all of the age groups surveyed it comes out at £1,284 a month. This is almost one third lower than average income in the UK of £1,623. So it seems that although the government have been increasing the state pension at above inflation rates over the past ten years, pensioners are still falling behind the rest of society. Commenting on the report Clive Bolton from Aviva says that “….baby boomers are far more comfortable with debt than previous generations. Therefore we are seeing an increasing number of people entering retirement with unsecured and secured borrowing. Aviva research shows approximately 10% of the proceeds of equity release is used to repay debt.”
There is also a lack of understanding about the pension annuity market. Bolton adds that “….we believe some of the annuity confusion is a result of previous generations benefiting from an extensive state benefit support system. They simply didn’t need to know about these products.” Tom McPhail, a pension expert from Hargreaves Lansdown, said many who had an influence on the pension industry had let annuitants down. He said “The state pension system is not fit for purpose. It is complex and bureaucratic; for some people it is a disincentive to save”.
