2nd April 2015
Falling inflation has boosted the coffers of Briton’s over-55s and helped them better their savings habits as essential spending has plummeted by 7% in a year, according to research from Aviva.
UK inflation reached a 15-year low of 0.5% in December – and subsequently fell to an all-time low of 0% in February – driving down over-55s’ outlay on basics such as food and utilities.
At the same time, the insurer’s Real Retirement research shows the average income among over-55s experienced a 3% annual uplift.
It claimed that yearly disposable income has risen by £1,032, or 6% since the last three months of 2013 and by £1,440, or 9%, compared to the same period in 2011.
As a result over-55s have not only enjoyed a significant rise in their standard of living but the backdrop has helped them to also boost their savings, as well as reduce their debt.
The analysis shows that while average incomes have risen, over-55s’ monthly expenditure on essentials, such as food and utilities, has dropped from around £460 in the last three months of 2013 to £427, resulting in monthly savings of £33 – or £396 per year.
This has been driven by a fall in spending on food; the typical monthly bill reached a record high of £210 at the end of 2013 but since then, it has dropped to £196.
Clive Bolton, Aviva’s managing director of retirement solutions, said: “The rise in disposable income is a welcome sign that over-55s’ standard of living is on the up. It is a testament to their resilience and adaptability that they have come through the recession in such a strong position. After years of cutting back and struggling to make ends meet, their financial circumstances are clearly improving and they are finding more breathing space from month to month. This extra freedom is helping them to reduce their debts and increase their savings pots, two habits that will stand them in good stead during retirement.
“Planning ahead is the best way for over-55s to arm themselves against any unexpected costs in retirement. It is never too early to start building up a healthy savings pot, and whittling away any debts will help to free up extra funds in retirement. If and when inflation rises, careful planning will help to ensure more people can take this in their stride.”