Not as privileged as you might think

In the eyes of the general public, and sometimes the media, senior citizens are the age group with the greatest purchasing power, benefiting from the ‘wealth’ they have accumulated over the years. The Observatoire Cetelem reveals a somewhat different reality, in which the distinction between income and wealth is crucial. It also highlights the links between generations on this subject, with seniors paying particular attention to helping their descendants as well as their forebears.

RELATIVELY HIGH INCOMES

When it comes to income, seniors are not quite the privileged generation you might think. After the age of 65, often the pivotal retirement age, incomes fall significantly in all the countries included in this survey. According to the OECD, 80% are below the national average, with a significant poverty rate, as high as 14.9% in the UK.

There is a significant gap compared to the 25-49 age group, a period of life that often sees professional careers take off. On the other hand, as with all age groups, senior citizens’ incomes have risen in recent years.

There are major differences between countries when it comes to pensions paid to retired people. The amounts vary according to the different schemes, the extent of capitalisation and existing deductions.

THE WEIGHT OF REAL ESTATE

When it comes to wealth and assets, the situation varies from country to country, with Belgium being an “El Dorado” for senior citizens. With age, wealth gradually rises, often thanks to the acquisition of a home. This explains the marked difference between the under-35s and 55-64 year olds.

After the symbolic age of 65, the wealth of senior citizens tends to decrease as a result of them making more frequent and larger gifts, as well as transfers following the death of one of the spouses. This reduction also stems from the fact that consumption levels are being upheld while incomes are falling.

SENIORS OWN MORE PROPERTY THAN PREVIOUS GENERATIONS

SAVING: GOOD INTENTIONS GOING ASTRAY

While senior citizens’ incomes are declining over time, their savings rate is rising. First of all, it should be remembered that the savings rate in Europe has risen steadily in most European countries, peaking during the health crisis.

A close look at these rates by generation shows that seniors are strong savers, although not the most inclined to put money aside. While in the Iberian Peninsula, the ‘old’ are the ones who save the most, this is not the case in Germany and Belgium, where the youngest are the most active in terms of saving.

As we age, our needs and the way we use our money change as a result of the drop in income we mentioned earlier. Spending less and helping more make up a new pair of financial priorities (see below). Therefore, it is not surprising that fewer European seniors said they wanted to increase their savings over the next 12 months, compared to younger generations. 64% of 60- to 75-year-olds had no plans to increase their savings, compared with 36% of 18- to 59-year-olds.

PREDICTING FUTURE SAVINGS RATES: AN UNCERTAIN EXERCISE

Looking to the longer term, anticipating how the savings rate will evolve is no easy task. In France, for example, it stood at around 14% at the time of the health crisis, and has now risen to almost 19%. Furthermore, it has not fallen over the last three years as economists repeatedly forecast. Measures such as taxing transitions could encourage senior citizens to “deflate” their savings to help younger generations. We might then project a rate between these two limits of 14% and 19% by 2030, in other words 17.5%. However, what will happen in the meantime with geopolitical crises, economic trends, society’s anxiety and the many other factors that have a direct impact on the savings rate? These factors are hard to predict, so it is difficult to be certain that this forecast will come true.

INVESTMENTS TO PREPARE FOR THE FUTURE

While housing is often the largest component of seniors’ assets, it is not the only financial lever they use to prepare for the future. 6 out of 10 senior citizens said they had made at least one investment for their retirement, with choices varying from country to country. 30% had become homeowners, with the British and Belgians the most likely to invest in property. 21% had succumbed to the charms of life insurance, particularly Polish and French life insurance. 20% had taken out a retirement savings plan, especially the neighbouring countries on the Iberian Peninsula. 18% had bought shares or bonds, following the Germans’ example.