Nearly half of over-55s have less than £500 in savings
New research reveals that a worryingly high percentage of people could be facing a tough retirement.
Nearly half of over-55s have £500 or less saved up, according to the latest statistics in insurer Aviva’s ongoing Real Retirement Report series.
The alarming number comes as older people’s incomes continue to fall, pushed downwards by a combination of rising inflation and benefit cuts.
Higher prices and fewer benefits
In terms of inflation, the report highlights the rising cost of food; clothing and footwear; and entertainment, recreation and holidays.
The report highlights that 19% of over-55s received benefits in December 2012, but this has now fallen to 15%.
And looking much further ahead, there’s the prospect that the State Pension age may be raised again to rein in Government spending.
That suggests a real danger of some of the current group of pre-retirees ‘sleepwalking’ into a lower income and possibly curtailed retirement, as they are forced to work for longer.
Worryingly, the typical monthly amount being saved by the 55-64 age group has fallen from £39 in September last year to £33 now, although that’s not a surprise given increasing inflation.
If you’re worried about your retirement income, here are options beyond carrying on working.
Make cutbacks and pay off debts or start saving now
You might already have cut back as far as you can. If you haven’t, and you’re struggling, then it’s time to take a look at your household budget.
Write down all your spending for a month and take a look at areas where you might be able to save money.
For example, can you use your car less, or stop eating out? It’s tough, but short-term pain can reap long-term gain.
And can you save money by switching your gas and electricity supplier, home insurance, car insurance and other household bills such as your home phone? Spend an hour or two shopping around and see if you can save.
If you have debts, then your priority should be to pay them off while you have an income.
Otherwise, you should look to build up some savings. While savings rates are at rock bottom at the moment, hopefully this situation won’t continue indefinitely.
Shop around for the best rates using a savings comparison service such as ours on lovemoney.com. Remember your tax-free ISA allowance too, which is currently up to £11,520 a year, of which half can be saved in cash.
Make sure you’re claiming all your benefits
Research suggests that pensioners are missing out on around £5 billion a year by not claiming all the benefits they’re entitled to. The GOV.UK Benefits Adviser can help you find out if you’re eligible for benefits such as Pensions Credit, housing benefit and Council Tax benefit.
Use your home
If you could live comfortably in a smaller home, then downsizing is definitely an option. If you really need to raise some money then moving away to a cheaper area could pay off your debts and perhaps provide a small nest egg. But bear in mind that if you’re moving to somewhere unfamiliar you will need to make friends all over again and you could be far away from close family.
You don’t have to sell your home to downsize – you could rent it out and rent a smaller place. But make sure you tell your lender.
Or you could rent out a room, and if you earn £4,250 or less in a year the money’s tax free. For more on this, read Rent A Room scheme: tax-free cash from your spare room.
There’s also equity release, where you use the value of your home to give you an income but you continue to live there until you either go into long-term care or die.
However, this can wipe out the value of your home as a result of you paying interest on the amount you’ve borrowed. Or you could end up selling the ‘equity’ of your home for well below what it would be worth if you sold the home on the open market. For more, read The pros and cons of equity release.
More on planning for retirement
How to choose when you will retire
Why retirement can be bad for your health
How to get a State Pension forecast
Lifestyling: the 'low risk' pension tactic that could decimate your pot
Most Recent
Comments
-
You really need to think about retirement when you are 25 or so. I did. Get into Local Government and work your way up the slippery pole to become Head of Finance - or simliar. Then you get a decent pension and have had enough salary to save for a good retirement. Result? You pay higher rate tax, you pay Band G Council Tax on your large house, you pay extorniate fuel bills and the Chancellor cannot wait for you to die and collect 40% of the money you still have hoarded. You cannot win in this world . I'm not really grumbling but my nature ,being an acccountant, could not chuck my money away at any time of my life. We have three chilren all univeristy educated and fully paid for with no loans at all for them to be lumbered with. Mortage? I had one once but cannot remember when it was so long ago I could not wait to get shut of that monkey off my back. It is a bit late by the time you are 55 unless you plan some scam on others.
REPORT This comment has been reported. -
About ten years ago I realised that my pension pot was going to be worth bugger all due to poor performance and inordinately high charges from my various pension "providers" (@ttonytt 100K? you must live in a different street to most of us). I started a serious savings regime, putting up to 20% of my take home into high interest savings accounts (I don't earn enough to be able to risk any of it on investments) which at that time were in double figures. I did very well for a couple of years, once I had gotten the hang of it, and then 2008 happened. The banks removed all support for small companies (and still do despite all the Government handouts, sorry I mean despite the Government giving them OUR money) and the firm I work for has been on a four day week ever since. That one day a week accounts for the money I was saving and on top of that my son started at university the same year and needed my financial support to cope with housing costs beacause of the ludicrously high rents that are charged for anything with a roof.. My net income is down 40%, my 35 year old pensions are worthless, my savings are earning less than inflation and I'm 61 years old. Frankly I don't think I will ever be able to afford retirement.
REPORT This comment has been reported. -
poorpensioner. I recently bought a bungalow under the Stamp Duty Threshold. Even if you do have to pay SDLT on your new property, it could still be worth downsizing. A detailed spreadsheet usually helps with this type of decision. Taxes are the price we pay for an ordered society and sometimes we cannot avoid them . I dare say that in Syria very few people are paying taxes!
REPORT This comment has been reported.
Do you want to comment on this article? You need to be signed in for this feature
12 October 2013