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Millions face ‘reality check’ as cost of living and threat of rising inflation hits retirement dreams

4.5 million people have cut back on daily expenditure since retirement
601,000 retired people have had to return to full or part-time work since they ‘officially’ retired

There is a major gulf between the lifestyle ambitions of those yet to retire and the financial reality of retirement, according to new research from MGM Advantage. Its Retirement Nation 2010 report1 shows that 57% (20 million) of adults expect to take more holidays once they have retired and that 54% (19 million) expect to take up hobbies and other recreational activities. However, in reality almost a third of retired people (3 million) have taken less holidays and over 800,000 people (7%) have had to give up hobbies once they retired. The retirement income specialist believes that this is caused in part from the growing financial pressures faced by those in retirement.

MGM Advantage warns that the rising living costs and future inflationary increases will have a dramatic impact on the income available to those in retirement and that the situation could get worse unless they take more comprehensive steps to prepare for retirement and to protect their future income. The Retirement Nation 2010 report shows that over a third of retired people, 4.5 million, have cut back on their daily expenditure since they retired and that 601,000 retired people have had to return to full or part-time work just to make ends meet.

The Retirement Nation 2010 report shows that those aged 65 and over are the most likely age group to cut back on the use of utilities such as gas and electricity and that they are also the most likely to reign in major purchases and to seek bargains. This is despite 40% of people, almost 4 million, aged 65 years and over saying that their top priority for retirement is to have the ‘freedom to live my retirement to the full’.

Craig Fazzini-Jones, Director at MGM Advantage said: “Sadly too many people have unrealistic expectations of their retirement and many expect it to be one long holiday. While this can certainly be the case for some, the reality is much tougher for the vast majority and can often result in a worse standard of living and difficult financial decisions. You cannot start preparing for retirement too soon, whether that means paying into a pension, building a pot of savings or talking to a professional for advice.”

However, latest figures show that there has been a sharp increase in the cost of everyday items such as food and clothing, which could equate to as much as an additional £1000 a year for many families2. Likewise, as a result of rising inflation, MGM Advantage estimates that the average retired household, where the main occupant is aged 65-74 years, needs to find an extra £774.70 a year to maintain the standard of living they enjoyed just 12 months ago3. The corresponding figure for a home where the main occupant is aged 75 years and over is £383.91 and the average for all households is £1,222.66.

Major lifestyle decisions taken since retirement	Number of retired adults	% of retired adults
Scaled back on daily expenditure	4.5 million	38%
Taken less holidays	3.2 million	28%
Paid off mortgage	2.7 million	23%
Downsized main property	1.5 million	13%
Given up hobbies / recreational activity	816,000	7%
Released equity from property	636,000	5%
Had to return to work / take up part time work	601,000	5%
Regularly relied upon credit	486,000	4%
Made requests for financial assistance from relatives	119,000	1%

Source: MGM Advantage, 2010 Retirement Nation report, August 2010

On a regional basis, Scots are the most likely to scale back their daily expenditure during retirement (51%), compared to just 35% of people in the Midlands. People living in Eastern (1%) and South-East England (2%) are least likely to give up a hobby compared to a fifth (20%) of retired people in Yorkshire & Humberside.

Fazzini-Jones continues, “Those approaching retirement should take care to choose the best annuity to make their retirement savings work hard for them. Too many people still take the income offered by their existing pension provider rather than shopping around for the best annuity by using the Open Market Option. Failure to shop around could mean a difference of tens of thousands of pounds in lost income through retirement.

“Another way that people can enhance the level of income they receive in retirement is to select a retirement income product that maintains exposure to the stock markets. While it does involve some risk, it also has a better chance of generating upside returns, negating the impact of inflation and maintaining a comfortable lifestyle.”

- Ends -

Notes to editors

(1) Research conducted of 2016 GB adults by ICM Research on behalf of MGM Advantage. The survey was conducted online between 21st and 23rd July 2010
(2) Moneysupermarket.com, 5 August
(3) Based on MGM Advantage analysis of the latest available ONS Family Spending Report (2009) and Consumer Price Index in January 2010.

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