Over 50s holiday spendingPosted on: 13 October 2016 by Gareth Hargreaves
Steve Wanless looks at the disposable income of older people after CEBR report finds over 50s have increased spending on travel by 23% in last 5 years
With news that over-50s have increased spending on holidays by 23%, should I get one of those ‘I’m spending my kids inheritance’ stickers and just enjoy life?
With the 2016 we’ve had to date and what’s still to come with Brexit and the US Presidential race, then it’s pretty tempting to just go on one long holiday.
And it seems like for many retired people, that is exactly what they are doing.
A recent report by Centre for Economics & Business Research (CEBR) on behalf of Saga, shows that over the last five years people over 50 have increased spending on travel by 23% (1).
In 2015 the over-50s spent £39bn on travel, well over half the UK’s total holiday spend (1).
It seems that one of the reasons for the increase is additional disposable income people enjoy after paying off their mortgage.
A report by Saga Investment Services in June this year highlighted that over-50s who have completed their mortgage repayments are £322 better off each month (2).
Of those, 45% paid for home improvements, 40% spent it on holidays and 27% bought a new car (2).
However, only 23% of people put the extra cash into a pension, while those that did only set aside 40% for retirement. If you had cleared your mortgage at 55 and paid all the extra money into a pension until retiring at 62 (average retirement age of those surveyed), then you’d have an additional £40,000 thanks to tax relief on pension contributions (2).
As well as the extra cash from mortgage savings, those who retired before 2011 have benefitted from the ‘triple lock’ on pensions, which means that the state pension has risen in line with average earnings, consumer price inflation or 2.5% based on which of the three is the highest (1).
Combined with final salary pensions, which are likely to become rare in the next 10 years, then income rose for the over-60s by 11% between 2008 and 2015 (1).
So, while a portion of the population have been fully enjoying retirement, then what about Generation Y, those born between 1980 and the mid-90s?
In the last 30 years the disposable income of those aged between 25 and 29 has fallen by 2%, while 65 to 69 year olds have seen a 62% rise, and 70 to 74 year olds have enjoyed a 66% increase (3).
In the seven years from 2008 to 2015, those under 30 saw a 7% drop in income (1).
This means that the current generation is likely to be the first in a long time to actually earn less than their parents.
We have written a lot over the last few weeks about the slowdown and how this might impact on investment, especially after the British Chambers of Commerce predicted GDP will halve from 2.3% to 1% in the next year (4).
We have also discussed the ageing population and how the general population is expected to rise 3% with the numbers aged over 65 expected to increase by 12% (1.1 million) between 2015 and 2020 (5), while the cost of care is going to rise as local Government and NHS budgets are squeezed.
And while it is important to live for today, it’s important to thinking about taking some advice and planning for tomorrow to ensure that you can enjoy your holiday memories as you get older, while knowing your children will be in a position to support you.
For a free, no obligation initial chat about your individual finances, call WWFP on 0800 0112825 or take a look at their website www.wwfp.net.
1) BBC News – Holiday spending: Over-50s ‘go cruising, while young tighten belts’ – 27th September 2016
2) Love Money – Over 50s ‘spend their cash on holidays and cars’ once they’ve paid off the mortgage – 17th June 2016
3) The Guardian – Revealed: the 30-year economic betrayal dragging down General Y’s income – 7th March 2016
4) The Guardian – UK economy to hit near standstill as Brexit vote hurts investment – BCC – 12th September 2016
5) Parliament.uk – Political challenges relating to an aging population: Key issues for the 2015 Parliament – Accessed on 27th September 2016
The value of shares and investments can go down as well as up. Your home may be repossessed if you do not keep up repayments on your mortgage.
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