According to a recent article in the Daily Telegraph, drawing on data from the International Longevity Centre (ILC) and the Institute for Fiscal Studies (IFS), baby boomers are a “frugal not frivolous” generation, with the data revealing that people in their sixties and seventies are saving nearly twice as much money as thirty and forty-year olds.
The International Longevity Centre says the stereotypical idea that pensioners are splurging on holidays, cars and gadgets is a myth, claiming instead that many are cutting back on non-essential spending when they retire.
The findings contradict fears over pensioners blowing their retirement funds on Lamborghinis and running out of money, as was suggested when pension reforms were introduced last April. The average person aged between 70 and 74 saves £4,043 a year from their income while someone in the 40-44 age bracket puts aside an average of just £2,411, 41% less than their elder counterparts.
The research found spending on nonessential items dips significantly between the ages of 70 and 74. Suggested reasons for this included an increased amount of time spent at home alone, potentially due to poor health, with time spent in the company of family and friends falling. As a result of decreased activity among the elderly, the ILC found the biggest savers were aged 80 and over, putting away an average of £5,870 a year.
Ben Franklin, head of economics of ageing at the International Longevity Centre, said:
‘Our research does not reveal any sudden consumption boom on entering retirement, which is somewhat against the grain of stereotypical images of retired people on cruises and playing golf. Instead people slowly reduce their consumption on non-essential goods and services during retirement, cutting out holidays, other leisure activities and eating out. While some of this is the result of declines in health and leaving the workforce, this doesn’t explain the full extent to which people are consuming less in old age and the subsequent rise in savings. This may mean that some of the fall in consumption is actually down to people’s preferences.’
The data was based on the average for the highest-earning member of the household for respondents of the Office for National Statistics’ latest Living Costs and Food Survey.