Retirees have money to burn

Retirees spend most of their money on having a good time

senior woman in sports car

A new study shows that the average pensioner is so well off that they can afford to splurge on the good life. Apparently, retirees now spend more on having fun than they do on the basic essentials.

The study by Retirement Advantage, found that £2.36 of every five pounds spent by pensioners goes on the boring basics - like heat and light, food and drink, clothes and shoes. The other £2.64 gets spent on much more entertaining non-essentials - like eating out and holidays.

The breakdown of an average fiver includes £1.19 on housing and bills, 67p on food and drink, 19p on insurance, 16p on clothes and 15p on health and education.

At the more exciting end of the spectrum it also includes 91p on leisure and holidays, 61p on transport, and 42p on eating out, alcohol and tobacco.

It's hardly surprising really. Pensioners are now richer than more than 60% of the working population - thanks to careful saving in generous pensions - and house price rises that have brought a number of people a downsizing windfall.

A new opportunity

The fact that pensioners retire with so much wealth means that despite facing collapsing annuity rates, many of them can afford to live off the income from an annuity. However, Andrew Tully, Pensions Technical Director at Retirement Advantage, is urging them to consider the alternatives.

Thanks to the introduction of pension freedoms, they could, for example, use part of their pension pot to buy an annuity to cover the essentials. They could then leave the rest invested to give it the opportunity to grow during their retirement, and draw money from the pot occasionally when they wanted non-essentials - like an annual golf club subscription or a holiday.

It would mean they might have more left in the pot later in retirement to pay for things like the cost of care, property maintenance or adaption - or indeed anything else they fancied.

This won't suit everyone, but for many a hybrid approach like this offers a mixture of security and flexibility that appeals. It means that when you come to retirement, it's well worth getting advice, or speaking to someone like the government's Pension Wise service, so you understand all of your options before you make a decision.

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