Over 55s 'fail to save' for retirement

Almost half of those approaching retirement fail to save any money each month, while a fifth still owe more than £75,000 on their mortgage, according to a new report.

The Real Retirement Report, released on Wednesday by Aviva the UK’s largest insurer, revealed that people aged between 55 and 64 have lower savings levels, bigger mortgages and are less likely to own their own home than people who have already retired.

The group said people in this age group typically had savings levels of around £8,600, while 40 per cent of pre-retirees admitted they did not manage to set aside any money at all on a regular basis.

Aviva interviewed more than 1,200 consumers for its first quarterly report into the three ages of retirement: 55-64, 65-74 and the over-75s.

It found that of pre-retirees, 20 per cent of people still owe at least £75,000 on their mortgage and only 76 per cent own their own home, compared with 84 per cent of people aged between 65 and 74 and 81 per cent of the over-75s.

“This report shows a worrying picture whereby those who are already retired are actually - to a large extent - financially better off than pre-retirees, “says Clive Bolton, at retirement director for Aviva Life.

“Their income might shrink as people retire but the current generation of retiring and long term retired have a higher incidence of home ownership, lower debts and more savings than pre-retirees. There is a growing disparity between the haves and the have-nots when you look at the three ages of retirement.”

Pension advisers said the report’s findings showed that both politicians and insurance companies were not doing enough promote pension saving.

“The Open Market Option should be the default at retirement, thereby ensuring that as many investors as possible make an active choice with their pension fund,” says Tom McPhail, Head of Pensions Research at Hargreaves Lansdown and Chairman of Pensions Income Choice.

“Insurance companies should be promoting choice, rather than simply allowing their clients to end up with second rate and inappropriate products.”

The report also found that couples may be missing out on thousands of pounds in income due to ignorance over the benefits of a joint life annuity.

Joint life annuities can benefit married couples as the annuity income does not die with an individual but enables it to be diverted to the surviving spouse or other beneficiaries.

However, Aviva’s report found that while joint life annuities are widely available, only one third of married people under the age of 65 take out a joint annuity, with 54 per cent of consumers not knowing what the annuity is.

Joint life annuities will typically yield about 20 per cent less income per year than a single life annuity.

The report also found significant confusion over the impaired and enhanced annuities, which offer better rates to those who are in poorer health or who smoke.

It is estimated that 40 per cent of people could benefit from taking out these annuities, which will boost their retirement income for the rest of their lives.

However the report said that most retirees and pre-retirees choose standard annuities as they do not realise their health conditions could boost their annuity income.