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Over 55s see expenses eat into their savings

Over 55s see expenses eat into their savings

Category: Savings

Updated: 09/09/2010
First Published: 09/09/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Over 55s are seeing unexpected expenses eat into the savings they have set aside for retirement.

Nine in every ten people aged 55 or over said they had faced unexpected expenses in the last five yeas, according to Aviva.

Such costs may not pose much of a problem to England boss Fabio Capello, 64, who has recently said he was looking forward to living as a pensioner when he quits his post in 2012.

However, for those not on the Italian's reported £6 million per year salary, the unexpected expenses highlight the need for building up a 'rainy day' pot as well as savings for retirement.

The problem is highlighted by the 64% of over 55s that said they fear a rise in the cost of living more than anything else, a huge increase from the 18% recorded in May earlier this year.

Just under two thirds (61%) of over 55s are also worried about how they will pay for unexpected expenses of £500 or more.

Despite large numbers of over 55s being hit with expenses, more than half (55%) have not made any provisions for unplanned outlays.

Just 6% have made any plans for long term care, 9% for private medical care and 23% for the upkeep of their homes.

Over 55s funded their unexpected expenses by dipping into emergency savings funds (45%) and by using income-generating savings (25%). In addition, 17% cut back in other areas, 11% took out a credit card or loan and 6% sold assets.

The long-term retired – those who have been economically inactive for an average of 12 years – were most likely to dip into their income-generating savings (27%) and least likely to use emergency savings (38%).

This might suggest some over 75s have used up their 'rainy day' savings in early retirement, and are now forced to sacrifice potential future income to pay for immediate expenses.

With that in mind, it might be worth checking out the recent Moneyfacts.co.uk run down of some of the best 'rainy day' savings accounts in the market, which you can view here.

"Over the last 30 years, people have generally seen retirement as an opportunity to relax after a long working life and enjoy the fruits of their labour," said Clive Bolton 'at retirement' director at Aviva.

"However, when you consider that for a savings pot of £16,296, you would get an annual gross income of just £117 from the standard branch based notice account, you can understand why many over 55s are very worried about their finances."

"In fact, these figures reveal that one in five over 55 households is struggling to get by on almost a third of the national average income."

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