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What your finances could really look like in retirement

Being mortgage-free and enjoying three holidays a year may be what people expect from retirement, but few are achieving it.


by Michelle McGagh on Jul 11, 2012 at 11:16

What your finances could really look like in retirement

Imagine your retirement: are you picturing yourself mortgage-free, playing endless rounds of golf and with a healthy pot of money in the bank to fall back on? Well, unfortunately this isn’t the reality for most pensioners, who have often failed to pay down debt and save enough to live a worry-free retirement.

The Real Retirement report by insurer Aviva has shown that although retirement income has increased slightly, the cost of housing and debt are still the biggest costs retirees are paying out.

Since the beginning of the year, monthly retirement income has risen by 4% from £1,303 in the first three months of the year to £1,361 in last three months.

Inflation eats into incomes

Monthly income has increased £122 since February 2010, but this is not a significant amount when inflation is taken into consideration. Although inflation for over-55s has fallen from 5.41% in the last three months of 2011 to 3.21% in May this year, it is still higher than inflation for the UK population as a whole, which stands at 3.1%.

Inflation is higher for pensioners, as they spend a greater proportion of their income on food, heating and fuel than working people tend to. For example, income has risen £122 per month, but the average food bill has also risen by £17.48. 

Despite the increase in income, money is still being spread thinly – especially when mortgages and debt still have to be paid. Here’s the reality of what your finances could look like in retirement.

Working in retirement

Giving up the nine-to-five at age 60 is a tantalising prospect, but the reality is that 32% of those over 55 are still getting an income from work, with 61% of 55- to 64-year-olds still working. The number of 55- to 64-year-olds working has increased, as people realise they have to work longer and early retirement is a luxury only a fortunate few can afford.

However, the number of people aged 65 and over who are working has dropped. Clive Bolton, at retirement director for Aviva UK, said many older people who wanted to work were struggling to, either due to the recession or ill health.

‘While many over-55s may wish to work beyond the traditional retirement age – either due to financial or social reasons – it appears that the current economic situation does not always make this possible,’ he said.

‘This will be particularly bad news for those people who have not made sufficient provision for later life and were counting on those extra few years to boost their inadequate savings.’


Most people hope to be mortgage-free by the time they retire, but there is still a large proportion of people who are paying off their property debt in retirement. A total of 17% of over-55s still have a mortgage, but when this is broken down by age, a quarter of 55- to 64-year-olds are still burdened by housing costs, compared with 12% of 65- to 74-year-olds and 5% of those over 75.

A total of 64% of over-55s own their home outright, but 22% of over-55s income is spent on housing costs, the largest outgoing they have. Older people who still have mortgages are working hard to pay down their debt on their home, but this is at the expense of saving for the future.

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5 comments so far. Why not have your say?


Jul 11, 2012 at 14:50

It all depends how much the retired person(s) want to spend.

The latest "Socially acceptable" figure is £24k for a couple but there was no mention of how it was made up.

Some retired folks insist that they must have £50k to "survive".

The first and most important question in retirement planning must be: "How much do YOU need to spend to have a happy and fulfilled retirement"

Once they can answer that, its only a matter of saving to achieve it....

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Mr Robert

Jul 11, 2012 at 16:11

100K if you want a few good holidays a year !

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jo soap

Jul 11, 2012 at 16:23

100k ! what bullsh1t

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Anonymous 1 needed this 'off the record'

Jul 11, 2012 at 17:14

Can't understand it, my wife and I get by on only £40K between us and have about £1K/month unspent. Next year my state pension kicks in so with SERPS will will have to get by on over £50K. No mortgage or outstanding loans and biggest cost is investing more spare cash and giving it to our kids. Any advice?

It's all about financial prudence in the past.

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Jul 11, 2012 at 20:58

The two quotes I would make for the record are.

Too much money and very little time.( prior to Retirement)

Too much time and not enough money( after Retirement)

Who said two thirds of final salary was the figure to aim for. More like two times salary if you ask me if you are looking to do the things that you put on the back burner when time was a premium. If you are fortunate enough to be in a final Pension Scheme, my advice would be to squirrel what you can afford into Invest ment Trusts ISA's with the aim of switching the tap on in the form of dividends. You will be glad you did.

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