‘Financial equation does not add up for over-55s’

Rodger Marsden, head of retirement for Aviva, said: “For many over-55s the current financial equation does not add up. No one wants to spend their retirement scrimping and saving just to meet their monthly financial obligations.”

He said people were more likely to cut back on the amount that they save, or even dip into their savings pots, to make ends meet.

Mr Marsden added: “For younger generations, an increase in retirement saving is vital. However today’s over-55s are unlikely to be in a position to do this.”

He pointed to additional data from the provider that suggested over-55s were vulnerable to unplanned expenses, especially the need to plan for any care fees in later life.

However Mr Marsden said equity release could help as 81 per cent of over-55s were homeowners, with the average home valued at £236,474 and a household equity average of £222,789.

Aviva’s date follows research by MetLife that found the average UK pensioner pays out 29 per cent of their income in retirement, which adds up to a yearly bill of nearly £42bn in direct and indirect taxation.

However the data found that less well-off households were paying out 42 per cent, proportionally the most in direct and indirect tax. The bottom 10th of pensioners households, who were receiving an estimated £8259 a year, were paying an average of £3599 in tax each year.

Dominic Grinstead, managing director, MetLife UK, said that with such a high percentage of gross retirement income being swallowed up by tax, it was clearly a major factor to consider when planning for retirement.

Mark Ireland, financial planner for Hertfordshire-based Richmond House Financial Services, said: “Our ageing population needs to address an ever-worsening retirement savings gap. The demise of private sector final salary schemes, low annuity rates, greater longevity – which comes with longer periods of nursing care and medical costs – plus a higher inflation level for the elderly were all to blame for the squeeze on our parents’ and grandparents’ pockets.

“It is vital that we educate our children about the importance of saving and investing, and not relying on the credit culture so many of us have grown up with.

“It’s also vital that the government incentivises and encourages long-term saving. That doesn’t necessarily mean funding it, but creating an environment where it is considered good to save. Hopefully if auto-enrolment is embraced in time this will plug some of this gap.”

Monthly income and expenditureSource: Aviva

	All 55+	55–64	65–74	Over-75
Income	£1361	£1359	£1390	£1318
Expenditure	£1334	£1409	£1420	£1279
Difference	£27	-£50	-£30	£39