Savers approaching retirement are ignoring austerity pleas from the government and leading a massive spending spree.
Britain’s economic revival is giving the over 55s renewed confidence in their spending power, says new research by financial firm Aviva.
As a result, their monthly spend of an average £846 a month has increased – and an increasing amount of the money is funding luxury purchases.
Their main spending is on food, fuel and a mortgage, but more money is going towards luxuries such as clothing, holidays and eating out.
Homes are the over 55s most valuable asset. The average home is priced at £253,322, but regional variations mean the average home price in London is almost £460,000, which pulls up the average elsewhere.
Nearly two-thirds own their home outright.
The study reveals the over 55s are saving less for retirement as salaries and house prices rise. The average monthly saving is just £46.
The firm warns that much of the extra spending is coming from borrowing on credit cards, personal loans and overdrafts and that average debt for the over 55s is £2,269. This is the highest level of debt since 2010.
Clive Bolton, Aviva’s managing director retirement solutions, said: “The over 55s age group definitely feels better about the economy now than they did a few years ago and this is reflected in their increasing spending.
“The problem is they are not saving enough and propping up their spending by taking on debt. Rising house prices may be fooling them into thinking they can fund their retirement from downsizing.
“The danger is they are underestimating the amount of money they will need to fund a comfortable retirement.”
£5,000 a year shortfall
Another study by financial firm Friends Life explains most retirement savers believe they will need a £409 a week income, but they only have savings that will generate around £312, leaving them £5,026 a year short of comfortably funded later years.
The good news says the firm, is almost a quarter of over 55s are saving as much as they can into a pension – most of them live in the West Midlands, Scotland and the South East.
Those not saving enough live in London, the East Midlands and South West.
Andy Briggs, the firm’s group chief executive said: “It’s worrying that retirement savers in some areas are unprepared for giving up work and will face a significant financial shortfall because they are not planning for the future or considering that living costs are likely to rise.”