OAPs splashing the cash? They prefer to save it
A RETIREMENT spent enjoying cruises, indulging in expensive dinners and relaxing at the golf club is more of a myth than a reality, a report has found.
Instead of splashing the cash, pensioners cut down on spending and save more – regardless of their income.
The increase in saving, which happens on average between the ages of 70 and 74, is driven by retirees spending less on nonessentials such as eating out, holidays and other recreational activities.
It means a household headed by someone over 80 spends £131 a week less – excluding mortgage costs – than one headed by someone in their 50s, according to the International Longevity Centre study.
The average 80-year-old saves around £5,870 a year, while the total annual savings of the UK’s pensioners are around £48.7billion – equivalent to 2.8 per cent of GDp. Retirees spend ‘progressively less’ as they get older, with spending dropping by 1.4 per cent for every year the head of the household ages.
The report said: ‘This seems to contradict the stereotypical image of retirees splurging in the immediate post-retirement phase of life, going on cruises and spending all their hardearned cash on fun activities. There does not appear to be a post-retirement spending boom on leisure and holidays. In fact, from age 50 onwards, spending on most non- essential items begins a slow decline.’
The report’s authors said the drop in spending could be fuelled by poor health ‘getting in the way’ of taking part in activities, particularly among the oldest pensioners.
Some may use their disposable income to help children or grandchildren with university tuition fees, debts or getting on to the housing ladder.
The study suggested others may ‘under- consume’ because they want to leave a bequest to their families. Most pensioners had a ‘ high expectation’ that they would leave at least £50,000, the report said. But there was also a considerable gap between rich and poor pensioners – with a quarter in around £100 a week’s worth of debt, while the rest saved about £145 a week.
Those with savings typically kept their cash in a low-interest current account.
The ILC is calling for everyone reaching the age of 70 to receive a ‘financial health check’ to help them plan. Tim Fassam of prudential UK, which funded the report, said the results were unexpected.
He added: ‘By having a greater understanding of spending patterns in retirement, the rate at which older people save and their hopes to leave an inheritance, it becomes easier to help them plan for retirement.’
‘Poor health gets in the way’