Retirement planning in retrospect: Real Retirement Report Autumn 2013

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Since 2010 Aviva have annually produced a quarterly Real Retirement Report with this year’s Autumn edition published in October. The focus of the Autumn 2013 Real Retirement Report was to delve into the financial attitudes of those 55 and over to tease out an understanding of what constitutes a happy and secure retirement. The report also sets out a detailed overview of the financial patterns of older people and the wider fiscal context.

The research looks across three age categories: pre-retiree (56-64), retiring (65-74) and long-term retired (over 75). Since the research began in 2010, more than 17,686 UK consumers aged over 55 have been interviewed. Interview data forms the substantive element of the research findings but where appropriate additional data sources are incorporated, and include: Office for Statistics, Consumer Price Inflation Index and Land Registry, House Price Index.

Some of the key findings when looking at the attitudinal sentiment recorded include: money and savings, despite being important for older people, is not the main factor when considering career plans. Salary expectations as a factor for careers choices among older people were superseded by the thought that they would be good at an occupation or that they had a genuine passion for the work. Indeed, money ranked as the fifth most important factor for older people when choosing a career. The research also found that with the benefit of hindsight, Half of the over 55s state that that if they could have the time over again, they would save more on a monthly basis.

In looking at financial health: there do appear to be green shoots of recovery apparent in recent economic performance and this is demonstrated in that, over the last year, an additional £26 has been gained in the monthly income of over 55s, this boosts the overall average monthly income to £1489, the highest figure since the real retirement report series began in January 2010.

However while income has risen, the average monthly expenditure has also increased to its highest levels since the beginning of the report series, standing at £1308 – 9% higher than the average in September 2011.

Looking at the proportion of over 55s that fall into specific income bands, the proportion of over 55s falling into the lowest income bands has reduced – in September 2012 11% of over 55s earned less than £500 while 15% took home less than £750, both of these figures improved by October this year, to 14% and 22% respectively.
The average amount saved each month by over 55s stood at £50 this quarter. The figure for the 55-64s is £33, for 65-74s is £76, and for over-75s stands at £69. Somewhat worryingly, the average monthly amount saved by pre-retirees (55-64) has dropped from £39 in September 2012 to £33 in October of this year, a reduction influenced by the fact that 40% of this group, two percentage points higher than a year ago, now save nothing each month.

However the overall improvement in monthly savings masks a decline in savings pots over the last year, with the typical over 55 pot standing at £18,364 in September 2012, yet dropping to £14,184 by October of this year, a decline of 23%. This figure masks significant variation between the three age bands. With a 41% reduction among those at retirement age, a 44% rise among the over 75s (most likely due to presence of lingering debts at the point of retirement, prompting some to dip into their cash reserves to clear any outstanding balances and start afresh with their budgeting during retirement, and a 22% reduction among the 55-64 year olds.

In returning to the theme of the report, what makes for a happy retirement, the overarching finding of the study is that good health is the most important factor. The second most important factor is having enough money to live comfortably.

The report sets out recommendations as generated by the research in terms of what older people taking part have expressed as to what they would do differently given the chance – which financial decisions have made differently. Putting aside savings each month as early as possible, even if it is a modest amount, is one of these four points, as is speaking to a qualified financial adviser to take full stock of financial options.

Looking at these issues from a lifecourse perspective it is clear that conversations on saving for retirement income need to come sooner rather than later. There is still time to ensure that future generations of retirees do not regret not saving more on a monthly basis, as today’s older people do.

Trinley Walker

The International Longevity Centre-UK is delighted to have worked closely with Aviva for a number of years through our partnership programme. If you would like any further information on the International Longevity Centre-UK’s partnership programme then please do not hesitate to contact us: info@ilcuk.org.uk – 0207 340 0440.

Aviva – Real Retirement Report Autumn 2013 http://www.aviva.co.uk/pensions-and-retirement/retirement-centre/report/the-financial-wisdom-of-the-retired/

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