Spending by older households rockets as incomes boom
Spending by 65+ UK households is booming due to an ageing population, driving an increase in their numbers, as well as rising pensions and growing income from employment, with many older workers putting off retirement, according to a new report from consumer research company, ConsumerCast.
The report, The 65+ UK Household, says that this age group’s share of consumer spending jumped to 20.3% in 2015, up 2.9 percentage points on 2010 and 4.3 percentage points in the past decade, as household numbers rose and their net income grew faster than that of the under-50s. They have been helped by rising personal and state pension income, underpinned by the government’s Triple Lock guarantee, which has ensured a minimum 2.5% annual increase in the state pension at a time when many working age benefits have been cut and wages have stagnated. Since the end of the default retirement age in 2011, earnings from employment have risen rapidly, boosting 65+ households’ income further.
These older households are set to ‘dodge the Brexit bullet’ from rising inflation in 2017 as their incomes carry on increasing ahead of prices, the report forecasts, unlike the under-50s who are projected to see a renewed fall in spending power next year.
Growing spending by 65+ households ought to be a boon for major retailers including M&S, B&Q, Homebase and Morrisons, for whom this age group makes up a quarter or more of their customer base. However, since the increase has been mainly been concentrated in non-retail areas like recreation and culture, including package holidays, transport, including the purchase of cars, and restaurants and hotels, it has mainly passed them by. Only in food, particularly at the middle and upper end of the market, has the total value of their spending risen significantly in the past five years.
Possibly the last generation to enjoy generous defined benefit pensions, on top of a state pension that has risen in real terms, many of these households now fall into the middle and upper income brackets of the overall population. These ‘platinum pensioner’ households have seen their spending boom, with those in the top fifth by gross income nearly doubling expenditure in the past five years.
According to the report, retailers need to seek out niche opportunities from this growing and increasingly wealthy group of households, including in-store restaurants and bars, marketing tie-ups with travel and leisure brands and the growth in spending on food and alcoholic drinks. Clothing retailers need to change they way they market to an increasingly fashion-aware mature, wealthy audience, using older models in their advertising. With only 50% of this age group using the internet and, of these, only 11% buying regularly online (compared with 30% for the rest of the population), retailers still need to maintain investment in traditional media as a means of communicating with and selling to this audience.
For further information please contact Robert Carruthers, director of ConsumerCast, on 07980 860301/020 7794 5618