06Mar14 - Balancing the books: financial wellbeing in later life
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06Mar14 - Balancing the books: financial wellbeing in later life



From mortgages to credit cards, savings to debt, balancing the books as you get older remains a challenge. As the fastest growing part of the population, older people are increasingly important to the ...

From mortgages to credit cards, savings to debt, balancing the books as you get older remains a challenge. As the fastest growing part of the population, older people are increasingly important to the UK economy. It has been estimated, for example, that people over the age of 65 spend more than £100 billion per year, which accounts for around 15 per cent of all household expenditure.

At the same time, older people are experiencing more pressures on their often limited financial resources (such as the need to pay for care and the rising cost of living) which can reduce their quality of life. It is crucially important, therefore, that policy-makers and practitioners have a good understanding of the different aspects of well-being among older people, in order to inform the design of policies and services that affect their lives.

At this event we will hear research findings from the joint programme ‘Financial dimensions of well-being in older age’ from the Personal Finance Research Centre (PFRC) and the International Longevity Centre-UK (ILC-UK), funded by the ESRC as part of the Secondary Data Analysis Initiative. Findings from this research programme thus far have focused on three themes: understanding the ‘older consumer’; understanding older households’ balance sheets; and understanding the financial dimensions of wellbeing in later life.

In the second half of the event, key thought leaders will provide their responses to the research findings, and engage in an open debate on what kind of policy and business responses are needed to support older people with their finances.



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  • Little variation in expenditure on alcohol & tobacco and household goods & services
  • Although total expenditure decreases consistently with increasing age, other factors – tenure and income in particular – are just as important if not more important determinants of older households'’ spending patterns. As a result, there appear to be six dominant patterns of expenditure across the categories of expenditure which do not neatly map by age. It demonstrates clearly that there is no such thing as ‘the older consumer’ but that older consumers are characterised differently depending on their preferences, their resources and other factors such as their mobility and independence. Even so, the steady decrease in expenditure with age tells us that there are age-related factors. The younger profile of the smokers and, conversely, the finding that high spending on smoking did not persist into later life suggests that the smokers as a group will not age, either because they stop being smokers or because of poor morbidity. Housing costs and housing poverty is a very key factor in the wellbeing of older households, distinguishing the haves from the have nots.
  • I’ve looked at issues related to older people’s cash flow – Sharon’s going to talk about balance sheets in later life
  • Poor mental wellbeing – as measured by GHQ12 psychiatric caseness
  • MW & FM ‘inextricably intertwined’Corroborates Fitch et al, 2011Future work needed to unravel complex issues of causality and direction of therelationshipI’ve focused on mental wellbeing – hand over to Brian who has looked at another aspect of wellbeing – quality of life using the CASP19 measure

06Mar14 - Balancing the books: financial wellbeing in later life 06Mar14 - Balancing the books: financial wellbeing in later life Presentation Transcript

  • Balancing the books: financial wellbeing in later life An ILC-UK/PFRC joint conference Thursday 6th March 2014 #balancingthebooks
  • Welcome Paul Lewis Freelance Financial Journalist and presenter of Money Box #balancingthebooks
  • David Sinclair Assistant Director, Policy and Communications International Longevity Centre-UK #balancingthebooks
  • David Hayes Research Associate Personal Finance Research Centre #balancingthebooks
  • Balancing the Books: Financial wellbeing in later life Understanding older consumers: Consumer segmentation using the Living Costs and Food Survey David Hayes www.pfrc.bris.ac.uk/esrc 5
  • Our Approach • Using the Living Costs and Food (LCF) Survey, we: 1. Describe average household expenditure by age (using descriptive analysis); 2. Segment older households based on their patterns of expenditure (using cluster analysis); 3. Explore cluster membership www.pfrc.bris.ac.uk/esrc 6
  • Standard LCF expenditure categories • • • • • • • • • • • • Alcohol & tobacco Clothing & footwear Communication Education Food & non-alc. drinks Health Household goods & services www.pfrc.bris.ac.uk/esrc 7 Housing, fuel & power Recreation & culture Restaurants & hotels Transport Miscellaneous goods & services
  • Data Considerations • Good sample of household heads aged 50+ • To cover transition into and beyond retirement • Total sample size of 2,769 • Good distribution of age groups (even 80+ ~ 12%) • Equivalised expenditure • To take account of household size www.pfrc.bris.ac.uk/esrc 8
  • Absolute and equivalised expenditure by age 600 Pounds per week (£) 500 510 400 300 Absolute 286 189 200 160 100 0 50 but under 55 yrs 55 but under 60 yrs www.pfrc.bris.ac.uk/esrc 60 but under 65 yrs 65 but under 70 yrs 9 70 but under 75 yrs 75 but under 80 yrs 80 and above Equivalised
  • Proportion of total expenditure by age ↑ Food & non-alc. drink increases: 12% to 19% ↑ Housing, fuel & power doubles: 12% to 24% ↔ Communication constant: 3% ↓ Clothing & footwear halves: 6% to 3% ↓ Transport decreases: 18% to 7% ↓ Recreation drops: 16% to 11% www.pfrc.bris.ac.uk/esrc 10
  • The segmentation (clustering) process • Exploring how types of expenditure co-vary • Identifies dominant patterns • Classifies people into segments based on these • Clustered on the 12 expenditure categories • ...and the optimal solution contained six clusters www.pfrc.bris.ac.uk/esrc 11
  • Drivers of cluster membership • Highly statistically significant variations in expenditure for all 12 categories • Three categories were particularly strong • Alcohol and tobacco • Clothing and footwear • Housing, fuel and power www.pfrc.bris.ac.uk/esrc 12
  • The clusters Percentage in cluster (%) Mean weekly expenditure ‘Conservative consumers’ 46 138 ‘Foodies’ 19 228 ‘Burdened by bills’ 11 231 ‘Smokers’ 9 245 ‘Recreation and clothing’ 4 392 ‘Socialites’ 12 405 The average equivalised expenditure across the sample is £217. www.pfrc.bris.ac.uk/esrc 13
  • Spend far below average on non-essentials (such as recreation and hotels) Conservative Consumers • • • • • • Spent £138 on average Transport (£18) much lower than average (£32) Only 47% connected to the internet More likely to be the oldest old (22% cf. 15%) 38% in the lowest income quartile; 60% retired 56% gave benefits as main source of income www.pfrc.bris.ac.uk/esrc 14
  • Very high expenditure on food (£58 compared to the average of £34) Foodies • • • • • • Spent £228 on average Close to average expenditure in most categories A half (54%) live in two-adult households Very few households are renting (12%, cf.25%) Only 18% in lowest income quartile Larger houses (58% cf. 50% with 6+ rooms) www.pfrc.bris.ac.uk/esrc 15
  • Very high proportion of expenditure on housing costs (£4 in every £10, twice the average) Burdened by Bills • • • • Spent £231 on average All other expenditure is relatively low Low transport costs (lowest petrol expenditure) 70% in rented accommodation (cf. 24%) • Including 45% from a social landlord • More single households www.pfrc.bris.ac.uk/esrc 16
  • Spent £28 a week on tobacco products Smokers • Spent £245 on average • Very high spend on alcohol and tobacco (£36 per week/15% of total expenditure, cf. 3%) • One of the ‘younger’ clusters (62% under 65) • Almost a third still in full-time employment • Home-ownership is relatively low (42% cf. 54%) www.pfrc.bris.ac.uk/esrc 17
  • Recreation and Clothing • • • • • • At £65 each week, these fashionistas spend more on clothing than all the other groups combined! One of the two high-spending clusters (£392) High spend on recreation (£65) & transport (£53) Only 21 per cent of this cluster are 70 and above Two-thirds in larger houses (6+ rooms) 20% say benefits main income (cf. 10% socialites) Half of the cluster in the highest income quartile www.pfrc.bris.ac.uk/esrc 18
  • Enjoy the finer things in life, spending £131 per week on eating out, holidays and recreation The Socialites • • • • • • One of the two high-spending clusters (£405) Spent £96 on transport costs (24% cf.15%) Three quarters under 65; 41% working full time Income – 57% earnings; 33% investments More than half in highest income quartile 90% of households connected to the internet www.pfrc.bris.ac.uk/esrc 19
  • Important socio-demographic characteristics • Tenure: 97% of Socialites were homeowners • Compared with 29% of Burdened by Bills • Age: 40% of Smokers aged under 60 • Compared with just 26% of Conservative Consumers • Income: 7% of R&C in lowest income quartile • Compared with 39% of Burdened by Bills www.pfrc.bris.ac.uk/esrc 20
  • Policy implications • • • • Expenditure poverty not atypical Housing costs key in wellbeing Smokers are young (stop/morbidity) No such thing as ‘the’ older consumer? • Depends on preferences/constraints, resources, mobility www.pfrc.bris.ac.uk/esrc 21
  • What else would help inform policy? • Conservative Consumers are a diverse group • Positive/negative constraints? • Hostels, boarding houses, and institutions such as rest/care and nursing homes are excluded • The true effect of ageing vs. generational effects remains unclear – further analysis needed www.pfrc.bris.ac.uk/esrc 22
  • Sharon Collard Senior Research Fellow Personal Finance Research Centre #balancingthebooks
  • Balancing the Books: Financial wellbeing in later life Understanding older households’ balance sheets using the Wealth and Assets Survey Sharon Collard www.pfrc.bris.ac.uk/esrc 24
  • Wealth and Assets Survey • Provides survey-based estimates of households’ economic wellbeing • Individuals and households in Britain (not NI) • Longitudinal • Focused on Wave 2, 2008-2010 • 12,357 households headed by someone aged 50+ www.pfrc.bris.ac.uk/esrc 25
  • Total household wealth 800,000 Mean Median 700,000 600,000 500,000 400,000 300,000 200,000 100,000 50 to 54 55 to 59 www.pfrc.bris.ac.uk/esrc 60 to 64 65 to 69 70 to 74 26 75 to 79 80 and over Total
  • Components of wealth (% of each component) 100 90 80 70 Pension 60 50 Physical 40 Financial 30 Property 20 10 50 to 54 55 to 59 www.pfrc.bris.ac.uk/esrc 60 to 64 65 to 69 70 to 74 27 75 to 79 80 and over Total
  • Mortgage borrowing • 74% of households headed by someone 50+ owns their main home • 21% still have a mortgage, owe on average £62,000 • Mortgage borrowing and amounts fall with increasing age www.pfrc.bris.ac.uk/esrc 28
  • Heavy mortgage borrowing • Owe £50,000+: 9% • Loan-to-value ratio of 50%+: 17% • Strongly associated with owning other property • Especially if other property also mortgaged • Lower levels of other assets www.pfrc.bris.ac.uk/esrc 29
  • Mortgaged households aged 75+ • Only 2% of over-75s still have a mortgage • But half owe more than £21,000 • A quarter owes 25%+ of the estimated house value • Greater tendency to have non-repayment mortgages • Including interest-only with no linked investment www.pfrc.bris.ac.uk/esrc 30
  • Non-mortgage borrowing • One in four aged 50+ have consumer credit • Owe on average £4,500 • More common among people in their 50s • Declines steeply with increasing age • Drivers: high fixed costs, low household income, drop in income, struggle to make income last www.pfrc.bris.ac.uk/esrc 31
  • David Hayes Research Associate Personal Finance Research Centre #balancingthebooks
  • Balancing the Books: Financial wellbeing in later life Understanding mental wellbeing and financial management in later life using Understanding Society Wave 3 David Hayes www.pfrc.bris.ac.uk/esrc 33
  • Understanding Society • • • • • Uses third wave of Understanding Society (2011) Largest social survey ever undertaken in U.K. Socio-economics/attitudes/health Almost 20,000 people aged 50 and above Weighted to be nationally representative www.pfrc.bris.ac.uk/esrc 34
  • Measurement of mental wellbeing • General Health Questionnaire (GHQ) • A common tool to assess those likely to have, or be at risk of developing, psychiatric disorders • People rate themselves according to certain criteria (next slide); a score is calculated • GHQ12: score of above 3 = psychiatric caseness www.pfrc.bris.ac.uk/esrc 35
  • GHQ 12 Measures Concentration Capable of making decisions Enjoy day-to-day activities Losing confidence Loss of sleep Constantly under strain Ability to face problems Believe in self-worth Playing a useful role Problems overcoming difficulties Unhappy or depressed General happiness www.pfrc.bris.ac.uk/esrc 36
  • Logistic regression • We predict poor mental wellbeing (GHQ12) • Controls for the relationships between ‘predictor’ characteristics, to identify those related to an outcome measure of interest (i.e. mental wellbeing) • Predictors are demographic and socio-economic characteristics www.pfrc.bris.ac.uk/esrc 37
  • Better mental wellbeing among the over 50s: • 65-74s, compared to early 50s • Men, compared to women • Households in rural areas www.pfrc.bris.ac.uk/esrc 38
  • Poorer mental wellbeing among the over 50s: • Unemployed older people, compared to full-time workers • People in the North East, compared with the South West • Mortgagors, compared to home-owners www.pfrc.bris.ac.uk/esrc 39
  • The effect of financial management on mental wellbeing • Compared to those living comfortably: • Those getting by have twice the odds of poor mental wellbeing • Those finding it very difficult have eight times the odds of poor mental wellbeing • Remember this is controlling for all variables mentioned previously www.pfrc.bris.ac.uk/esrc 40
  • Brian Beach Senior Research Fellow, International Longevity Centre-UK #balancingthebooks
  • Financial Dimensions of Quality of Life at Older Ages Brian Beach International Longevity Centre – UK
  • Presentation Outline • • • • • • • Background Quality of Life at Older Ages Data & Methodology Financial Indicators Examining Quality of Life Changes in Quality of Life Implications of Findings
  • Quality of Life at Older Ages • CASP-19: Quality of Life in Older People – 19 Items (Hyde et al. 2003) – Control, Autonomy, Self-Realisation, Pleasure – 4-point Likert scale (0-3) – CASP-19 scale from 0 to 57 (increasing QoL)
  • Quality of Life at Older Ages Factors associated with QoL: • Age: increases from 40s to age 68, declines afterward • Social Relationships – Marital status/Partnership (also if providing care) – Close Family, Relatives, Friends – and frequency of contact • Health – Limiting long-standing illness – Limitations in Activities of Daily Living (ADLs) – Depression • Housing Tenure • Socio-Economic Status (education, social class)
  • Data & Methodology • English Longitudinal Study of Ageing (ELSA) – Nationally representative survey of population aged 50+ – Longitudinal Panel design: 5 Waves (2002-2010) – 9,000+ core participants per wave – 5,000+ in all five waves – CASP-19 included in self-completion questionnaire
  • Financial Indicators – Income – Housing Wealth – Financial Wealth – Pensions (Private & State) – Expectation of Future Financial Difficulty
  • Data & Methodology • Other Variables: – – – – – – Limiting illness Depression ADL limitations Education Subjective SES Housing Tenure – Age Group – Gender – Coupled (married or co-habiting) – Close Family/Relatives – Close Friends • Number + Frequency of Contact
  • Data & Methodology • Multiple regression analysis – Cross-sectional by wave – Fixed-effects models for multiple waves – Multiple imputation for missing values & Weighting • Longitudinal analysis – Modelling change in CASP across waves – Change in predictors
  • Examining Quality of Life • Negative associations with QoL: – – – – – – – Limiting illness ADLs Depression Providing care (Wave 5) Age (85+ in Wave 5, all in FE) [Having a degree-level education (Wave 5)] Expected Future Financial Difficulty
  • Examining Quality of Life • Positive associations with QoL: – – – – – – – – [Being female (Wave 5)] Home ownership v Mortgage (FE, males) Subjective SES Number of close family/relatives Number of close friends (not FE, females) Frequency of contact with friends Higher Financial Wealth Pensions: Private (Q4-5 in Wave 5) & State
  • Changes in Quality of Life • Positive: Subjective SES, Frequency of contact with friends • Negative: Expected future financial difficulty, Limiting illness, ADLs, Depression, Age Gender differences: • Males: Positive association with Financial Wealth (Q2, Q5) – Age significant from age 80 • Females: Positive association with Private Pensions (Q4, Q5) – Age significant from age 70 – Negative association of being in a couple
  • Changes in Other Variables Examining Wave 5 compared to Wave 1: – Wave 5 QoL strongly predicted by QoL at Wave 1 – Positive impact on QoL: • Less depression – Negative impact on QoL: • • Onset of limiting illness Decline in subjective SES
  • Implications of Findings • • Health factors play a crucial role in QoL at older ages Social ties: importance of social inclusion • Improving individuals’ sense of financial security may relate to improved quality of life – • Significance of financial wealth – • Importance of subjective perception: SES Implications for patterns of savings & debt State pension provision important – Private pensions could play a greater role if sufficiently substantial
  • Gemma Tetlow Programme Director Institute for Fiscal Studies #balancingthebooks
  • Peter Tutton Head of Policy StepChange #balancingthebooks
  • Dick Stroud Managing Director - 20plus30Acting Managing Director - Digital Unite #balancingthebooks
  • Lawrence Churchill Trustee International Longevity Centre-UK #balancingthebooks
  • Balancing the books: financial wellbeing in later life An ILC-UK/PFRC joint conference Thursday 6th March 2014 #balancingthebooks