FOUR out of ten “baby boomers” are approaching retirement without setting aside any money each month, a report showed yesterday.
Research compiled by insurer Aviva found that people aged between 55 to 64 are laden with debt and have scant resources to fund themselves after stepping down from work.
Individuals in the age bracket – “pre-retirees” – had an average savings level of just £8,593, with one in five still owing at least £75,000 on their mortgage.
A significant proportion of those questioned were struggling to survive on less than £750 a month.
Clive Bolton, retirement director at Aviva Life, said people born in the 1950s seemed more
comfortable with debt than other generations.
He explained: “They have done very well with credit between various stages of their lives, but when you come to retire and your earning power reduces it becomes more of a difficulty and a threat to your lifestyle.”
Bolton said entering retirement with a small savings pot restricted people’s ability to react to “shock” costs, such as medical treatment.
Aviva’s study also revealed a lack of awareness among consumers of the range of savings products available, with half of over-55s saying they did not know what a joint annuity was.
Matthew Woodbridge of financial advisory firm Chelsea said government policies had contributed to the problem. “In this country there is definitely a focus on cash-based savings,” he said. “Increasing the individual savings account (ISA) allowance helped, but the government took away the dividend tax credit which sent out the wrong message.”
Across the board, the greatest worry for over-55s was found to be the rising cost of living. Just under half were concerned about footing unexpected expenses, while around a third feared falling returns from their savings. Aviva said: “[This] really highlights the fact that many people do not see retirement as ‘golden years’ but rather as a worrying time of financial and social change.”
The rates on annuities – which are used to convert a pension pot into an annual income for life – have declined in recent years due to falling gilt yields and increased life expectancy.