Retirees have increased their spending at almost three times the rate of non-retirees in the last decade, new research from Canada Life's Retire UK report shows, with many of the older generation able to enjoy a definite spending boom as their income remains robust.
The figures estimate that the total retired population spent a collective £130bn last year, an increase of 71% from 2005, while the non-retired population has only seen an increase of 27% over the same period. Not only that, but in 2005, retired households made up just 12% of the UK's overall spending, but they have now increased their total share to 15%, rising by a quarter in the space of 10 years.
And, if the pace of spending growth continues, Canada Life estimates that retirees' spending will reach £194bn by 2025, even when taking the planned increase to state pension age into account.
The rapid growth of the retired population could have gone some way to explaining the overall increase in retirees' spending, with a total of 11.7m being retired last year. However, this can't be the only driver, as it isn't only collective spending that's seen an improvement – individual households have seen their spending growth soar, too, which suggests that retiree finances as a whole are improving.
The figures show that, over the last 10 years, the typical retired household has increased its spending by 53%, rising from £11,438 in 2005 to £17,465 in 2015. Disposable income is up sharply, too, recording an increase of 43%, but the fact that spending has seen faster growth suggests that retirees feel financially comfortable spending more of that additional income, the report noted.
In contrast, a typical non-retired household is now only spending 21% more than in 2005, yet they've seen a 26% increase in disposable income. This shows that, not only has their spending increased much more slowly than retirees', but non-retired households have also increased the proportion of income they save, arguably because they've had to "tighten the family purse-strings".
In even more welcome news for retirees, it seems that more of them are able to spend money on having fun (such as spending on entertainment, restaurants, hotels, alcohol and cultural pursuits) rather than necessities (e.g. food and clothing), with there being a clear shift in focus in recent years.
The figures show that retirees are now spending £13.6bn more each year on having fun than they did in 2005, an increase of 74%, and currently spend £31.9bn having fun every year – well above the £22bn spent on essentials. Once again, individuals are benefiting, too, with a typical retired household increasing its spending on having fun by 56% in the last decade, while essential spending is only up by 38%.
At the other end of the scale, non-retired households have seen spending on fun rise by just 9% since 2005 – well below inflation – while spending on essentials has risen by 22%.
"Times have changed for retirement in the UK," commented Richard Priestley at Canada Life. "Living standards are better than ever before, and retirees now have the financial firepower to make the most of later life.
"Pensioner poverty has not been eradicated altogether, but there have been dramatic improvements in income across the board, and most retired people are living comfortably. Spending has boomed as a result, even while the rest of the country has tightened its belt."
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