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Average over-55s income increased 0.65% in past year - but inflation rose 4.7%
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73% fear the impact of the rising cost of living over the next six months
Aviva's latest quarterly Real Retirement Report, which monitors the finances of the UK's over-55s, has found the marginal growth in income over the last year of 0.65% has been outstripped by a rise in ‘grey' inflation of 4.7%. However, the over-55s have started to prioritise debt repayment and saving as their income is squeezed by inflation.
The report which tracks the finances of the three different ages of retirement - pre-retirees (aged 55-64); retiring (65-74); and the long-term retired (75 and over) - also includes a focus on the final ten years of employment before retirement which highlights the importance of saving.
Falling debts:
The mean debt of those over-55s with debt has fallen from £19,878 (Feb 2011) to £17,112 (May 2011) as people look to repay their borrowing. Overall, the average amount owed on credit cards has fallen from £3,311 (Feb 2011) to £2,973 (May 2011), personal loans from £5,983 to £5,569, overdrafts from £2,202 to £988, store cards from £1,220 to £831, and hire purchase from £1,998 to £1,169.
Savings creep up:
The number of over-55s who are saving each month has risen from 57% (Feb 2011) to 59% (May 2011) and the median amount saved has risen from £27.23 (Feb 2011) to £32.94 (May 2011) as people seek to boost their financial security.
More secure about the future:
Despite the country's economic difficulties and perhaps because they are adjusting to the new financial environment, over-55s are feeling more secure about the future. Indeed, the number of over-55s who were worried about the rising cost of living over the next six months has actually fallen from 83% (Feb 2011) to 73% (May 2011).
Drop in real income
Adjusted inflation rose 4.7% for the UK's over-55s in the last 12 months, more than cancelling out the slight increase in average monthly incomes of 0.65% from £1,239 to £1,247 over the last year. The most severely affected by this are the long-term retired (over-75s) who have seen their income fall from £1,416 (May 2010) to £1,178 (May 2011).
The income of the retiring (65-74) has increased from £1,360 (May 2010) to £1,426 (May 2011), and the income of pre-retirees (55-64) dipped marginally from £1,352 (May 2010) to £1,324 (May 2011). The percentage of over-55s who survive on a monthly income of less than £750 remains relatively steady at 21% (May 2011) compared to 22% in May 2010.
Clive Bolton, ‘at retirement' director at Aviva said:
"The sixth Real Retirement Report has found the over-55s under pressure from the rising cost of living. While incomes have increased slightly, this has been negated by adjusted inflation of 4.7%.
"With changes to pensions and the threat of unemployment causing concern among the over-55s, it is encouraging to see a picture emerging of a group showing determination to tackle this by paying down outstanding debts and boosting regular savings.
"The rising cost of living has caused people to adapt their spending habits and to prioritise their income in retirement, but taking control is helping to reduce their fears about a slow economic recovery and its impact on their finances in retirement."
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