Over 50s lose £60k each because of downturn

eroded propertyAP Photo/Sean M. Fitzgerald

As the over 50s approach traditional retirement age, they are counting the incredible cost of the economic downturn. They have lost an average of £60,000 each, and wealthier individuals have lost £162,000.

So where has the money gone, and what can they do about it?
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The study

The research, by the Institute of Fiscal Studies, found that older people have lost an average of 10% of their wealth as a result of the financial crisis. Roughly half of the loss has been in the value of their home, while the other half has been eroded as stock market falls have damaged the value of investments linked to the markets.

The wealthier the household, the more they are likely to have been hit by the crisis - because they have more money tied up in property and investments. It means that the least well-off fifth of the population saw their wealth fall just under 5% (£9,400), while the wealthiest lost 13% - or £162,000 on average.
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Concern?

There will be those who will argue that these assets were always at risk, and that perhaps some of the wealthiest people have quite enough to manage on - so can sustain these falls.

The authors of the report also highlighted that compared to younger generations, most of these people are protected to a far greater degree, because their rights to a defined benefit pension are already guaranteed - and will not be affected by the financial crisis. Younger people, on defined contribution pensions, would stand to lose even more because the value of their pension would fall as well.


Timing

However, these people have often saved and made sacrifices in order to build up a level of wealth to protect their financial future. The timing of the financial crisis means they will have little opportunity to make these losses up.

Commenting on the results, Rowena Crawford, a senior research economist at the IFS and one of the authors of this report, said: "On average the richest fifth of individuals saw their household wealth fall by 13% or £162,000 – this at a stage in their life when they are most unlikely to be able to make up these losses later on."

Impact

Many of these people still have enough to get by on in later life. They simply said they would have less wealth to leave to their family after their death. This could be a blow for their adult children, who are sleepwalking into retirement, hoping to rely on an inheritance to make up the shortfall in their own retirement planning.

Those who have seen their wealth drop below the level they are happy living on in retirement have two options: they can either work even harder and make even more sacrifices in the years leading up to their retirement - or they can work on for longer than they had intended.

A report by the Pension Policy Institute found that half the workers aged between 50 and the State Pension Age will have to work at least six years past their retirement age - and most at least 11 years - if they want to maintain a reasonable standard of living.

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Tax tricks to improve your wealth
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Over 50s lose £60k each because of downturn

If you wear a uniform of any kind to work and have to wash, repair or replace it yourself, you may be able to reclaim tax paid over the last four years. For some people, this could mean a windfall worth hundreds of pounds

The interest you receive on savings accounts (with the exception of cash Isas) is automatically taxed at a rate of 20%.

Higher-rate taxpayers therefore tend to owe money on the interest they are paid throughout the year. If, however, you are on a low income or not earning at all, you should be able to claim all or some of the tax deducted back

You can apply for a refund of vehicle tax if you are the current registered keeper or were the last registered keeper of your vehicle that no longer needs a tax disc

If you pay tax on a company, personal or State Pension through PAYE (the system employers use to deduct tax from your wages), you may well end up overpaying

There is a limit to the amount you need to pay in NI, whether or not you work for an employer.

Instances in which you may find that you have overpaid include if you work two or more jobs and earn more than £817 a week and if you move from self-employment to employment, but continue to pay Class 2 National Insurance contributions

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