Retirement savings have fallen among workers aged between 55 and 64 over the past year; with nearly £20 billion being withdrawn from their pension pots.
Workers approaching retirement should be saving as much as possible in order to secure a comfortable standard of living once they stop working, but instead cash is being used to pay off debt and meet inflating everyday spending needs.
According to the Retirement Report by Aviva, two in five pre-retirees (workers within a decade of retiring) are failing to save as there is no cash left over from their monthly income. This is particularly worrying as this age group should have reduced financial burdens thanks to reduced or cleared mortgage debt and fewer dependents.
Caroline Abrahams, Charity Director for Age UK said that the Aviva report dispels the myth that the so called baby boomers, have sailed through the economic crisis and are financially thriving.
"Instead it reveals that many are struggling to stay afloat and are sacrificing future financial security to pay down debt," Abrahams said.
“Worryingly, if this trend continues and people fail to put money aside for retirement, we will begin to see future generations of older people slipping into poverty in their later life."
The number of pre-retired workers failing to save has increased over the past year, and the average savings pot among this age group has also fallen - as workers are forced to dip into retirement savings to pay bills and make up the shortfall of a declining income.
In fact, the Aviva report found that not only do pre-retirees have on average the lowest income - compared to those aged 65-74 and pensioners aged 75 and over - but they also are most likely to save nothing each month.
This is in part due to the fact that inflation for the over 55s - based on the spending more typical of older consumers - currently stands at 2.9%, having reached 3.4% earlier this year. The official rate of inflation for the UK, known as CPI, was at 2.7% last month.
The over 55s feel inflation more keenly as they are less likely to take advantage of low interest rates on mortgages and personal loans.
The typical savings pot of someone aged between 55 and 64 fell from £12,351 in September last year, to £9,653 this month.
The Aviva report also found that the one piece of advice the over-55s would give to their younger selves would be to save more on a monthly basis.
Clive Bolton, managing director of Aviva’s At Retirement business, said that it is vital that those in work make sufficient financial preparations for the future, while they can, as any unexpected expenses could have a serious impact if you don’t have savings to dip into.
“It is therefore particularly alarming to see the slump in savings habits among those who are nearing retirement,” he said. “Putting away even a small amount each month can make a real difference if you start early enough. Giving yourself some room to manoeuvre in the approach to retirement can prove invaluable, as it allows you the financial freedom to fund an enjoyable retirement regardless of any sudden expenses.”
