Over 55s are forced to drain savings as expenses mount

ONE in four Scots has been forced to dip into savings to cover unexpected expenses as income from deposits continues to dry up, new research has revealed.

The country's over 55s have increasingly been forced to take capital out of their savings accounts since returns plummeted as a result of the record low 0.5 per cent Bank of England base rate, in place since March 2009. Savings that were earmarked for retirement income are consequently being used to cover emergency expenditure from medical costs to car and household repairs, according to the Real Retirement Report by insurer Aviva.

The research found that 47 per cent of those who have had to pay significant unexpected expenses in the past five years had to dip into their emergency savings, while a quarter raided their income-providing savings. And almost two thirds of Scots over 55 are more worried than at any time in the past five years about how they would pay for any future unexpected expenses, according to Aviva.

But 64 per cent see inflation as the biggest threat to their standard of living in over the next five years. Scots in that age group also cited tax increases, serious illness and falling returns on savings and investments as posing a real threat to their standard of living.

Over 55s in Scotland are more concerned about tax rises than those south of the Border and are more likely to feel that their standard of living is likely to come under threat in the next five years.

Clive Bolton, "at retirement" director for Aviva, said the figures suggested growing anxiety among over 55s regarding their finances.

"Over the last 30 years, people have generally seen retirement as an opportunity to relax after a long working life and enjoy the fruits of their labour. However, when you consider that for a savings pot of 16,296, you would get an annual gross income of just 117 from the standard branch-based notice account, you can understand why many over 55s are very worried about their finances," said Bolton.

"In fact these figures reveal that one in five over 55 households is struggling to get by on almost a third of the national average income. "

The latest Real Retirement Report also revealed that the state pension remains the largest single source of income for over 55s across the UK.

Pre-retirees aged between 55 and 64 are significantly more reliant on benefits than those already in retirement, suggesting higher levels of redundancy and involuntary unemployment.