Financial Wellbeing in Later Life

With the over-85s being the fastest growing sector of the population, and one in six of us now over 65, it is worrying that older people’s finances are coming under more and more pressure.

 The University of Bristol’s Personal Finance Research Centre and the International Longevity Centre UK have published on a report on their study into the financial dimensions of wellbeing in older age. There is a link to it on the ILCUK news page.

Household income falls dramatically – from £286 per week at age 55 to £160 per week at age 80+. As a result, older people spend more on essentials – for example fuel and power goes up from 12% to 24% of household expenditure.

 The report identified two groups making up more than half of older people, which they called Conservative Consumers (“CCs”) and Burdened by Bills (“BBs”). The researchers were struck that the CCs spent far less on non-essentials than older households as a whole. And BB’s spent double the average on housing, fuel and power (i.e. 40% of household expenditure). And so there is a worry that these older people on lower incomes get “lost” amongst the supposed wealthy baby boomers.

 As far as housing is concerned, 74% own their own home but 21% also have a mortgage – average value £62,000.  At aged 50-54, the loan represents 33% of the property value, and by age 85+ that has fallen to 19% LTV.

If you are 85+ and your income is only £160pw, where are you meant to find the money to pay the interest on a loan of say £30,000 let alone the principal?  But the figure that is perhaps most surprising is that only 34% of over-85s are in repayment mortgages.  Most of the rest are in interest only mortgages – possibly because that is all they can afford.  The research highlights that thousands of pensioners are at risk from changes to interest rates and to the housing market in general.

 We have commented before on the relationship between debt and health. The report specifically looks at mental health and confirms there is a strong link. 

 More than half of older people who are finding it very difficult to get by financially are also suffering poor mental wellbeing. There is no evidence of causation here, and to an extent good mental wellbeing will allow people to maximise their income from work etc.

 Looking further afield, Great Britain ranks 7^th in the world for self-reported financial satisfaction amongst over 50’s (Switzerland tops the table) and 10^th in the world for happiness (behind New Zealand and Sweden).

 The research is continuing into whether trends and patterns are explained by ageing, and – funding permitting – into the picture of spending on alcohol, and also financial vulnerability in the over-85’s.