AXA - Be Life Confident

AXA Avenue Q3 Report predicts retirement misery for millions:

• Households up and down the UK take on 'Living on a State Pension' challenge ... and all but one fail
• Experiment dashes nation's plans for a retirement of holidays, weekend breaks, and cosmetic surgery
• 74% of adults expect to still be using credit in retirement

The state pension* lasts UK pensioners of tomorrow just three full days according to a report published today by AXA. This is the conclusion of a unique ‘Living on a State Pension’, experiment conducted among adults from across the UK as part of the year long financial social experiment, AXA Avenue.

By the end of the experiment which ran from Thursday to Wednesday, single women had overspent their budget by an incredible 200%, managing to last only two and a half days, while men overspent by 79% and lasted slightly longer, almost four days on average. The couples taking part in the experiment overspent by 168% and lasted just over three days.

As the pension debate continues to gather pace, AXA challenged 26 households, including couples and single people, to live off the equivalent disposable basic state pension. The research found that:

• Having started the experiment on Thursday, the households had used their entire weekly pension allowance by the time they sat down for Sunday lunch
• 28% of average spending went on drink, tobacco, papers, leisure activities and gambling
• The highest overspend was £327.18
• The lowest overspend was £0.54
• Only one household lasted the entire week on their pension with £4.36 remaining

The ‘Living on a State Pension’ participants were all planning a retirement of some twenty to thirty years. They envisaged filling their post-work years with all of the leisurely activities they are unable to do whilst holding down a full time job. However, the results of the experiment have highlighted to this select group the plight of today’s pensioners, and has somewhat dampened their luxurious outlook for their own retirement**.

Despite the proof that people fail to survive on a pension even when carefully budgeting, national research*** from AXA has found that people still have incredibly grand plans for their golden years.

Some 27.81m adults (74%) expect to have at least one annual holiday either overseas or in the UK in retirement. Weekend breaks and day trips in retirement are looked forward to by 26.84m adults and 26.64m adults plan to regularly dine out on their pension. Over 14m adults have aspirations of owning a place in the sun while 6% of UK adults even plan to have botox or cosmetic surgery in retirement.

Plans for retirement	Percentage / number of adults planning to enjoy in retirement …
At least one annual holiday	74% (27.8m)
Weekend breaks / day trips	71% (26.84m)
Eating out	71% (26.64m)
Running a car	67% (25.17m)
Being able to treat the children / grandchildren	63% (23.8m)
Go to the cinema / theatre	51% (19.25m)
Take part in leisure and sporting activities	50% (18.9m)
Improve the family home / garden	50% (18.9m)
Own a place in the sun	39% (14.78m)
Have botox or cosmetic surgery	6% (2.22m)

So how are we planning on funding this retirement of plenty? The focus of AXA Avenue has been to explore peoples’ attitudes to money and their understanding of managing finances. AXA’s national research has uncovered a worrying trend, with some 17.13m adults, 45% of the adult population, expecting to use credit cards in retirement and the percentage increases as people get older. Only one in four (26%), 9.82m adults, believe they will not be using any form of credit when they retire.

Saran Allott Davey, AXA Avenue’s resident independent financial adviser , commented on the findings: “The ‘Living on a State Pension’ experiment has produced startling results. The majority of those that took part have had a real wake up call and are much more aware of the need to plan.

“For those that took part, this experiment has been a real call to action. Many of them had visions of retiring at 55, even though they had no clear idea of how much money they were set to have as a pension. The pensions industry and the government needs to get the message across that it is easier to make some small changes now to set aside long term savings for retirement than having to make major and uncomfortable changes later on. I feel that our “have it all now” culture means that people are not willing to budget to set aside long term savings. This is likely to lead to a harsh retirement for many people.”

The experiment has highlighted not only the difficulty of living off the basic state pension but the fact that many UK adults are ambivalent when it comes to retirement planning.

Before the experiment 11% of the participants were planning to rely on the state pension in retirement. After the experiment all but one of those participants understood that they had to take personal steps towards planning their income in retirement. The experiment also encouraged participants to think more carefully about their long-term financial stability. After the experiment 62% of the group (compared to only 25% before the experiment) were planning to take immediate action to understand and improve their income and expenditure for their retirement.

Colin Nelson, AXA, commented , “The results from our ‘Living on a State Pension’ experiment highlight some worrying trends. The fact that we struggle to survive on this small amount is not surprising in itself but it is peoples’ attitudes towards funding their retirement that concerns us most. The experiment has acted as a wake up call for those who took part; now we want to communicate that to the rest of the nation.

“With AXA Avenue we are dedicated to helping people better manage and understand their finances. People have to understand that retirement is not going to be the care-free time we all hope for unless we plan for the expense.”

For a copy of the full AXA Avenue Quarter Three Review Report, including a financial update of the participants’ progress please go to www.axa.co.uk/avenue.

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