What is the role of pensioners in the recovery?

"I began to ask myself what impact will pensioners have on the economy? They are a special component as they consume far more than they earn."

They discussed the position of businesses and whether all would survive the opening up of the economy. They have been fewer liquidations than normal and Government support may have kept some weaker businesses alive longer than they would normally have done. The economy will be driven forward by those businesses that have the confidence and means to invest for the future.

This then moved onto households. Where jobs have disappeared or have been furloughed on lower income those households will inevitably reduce their spending. Will the economic impact of their reduced spending be offset by those who have acquired more savings? How quickly would they spend those savings and where would they spend them?
It seems a common soundbite of economists to mention there are only so many meals out a household that has accumulated savings can get through in any given period of time.

More importantly what will be the working patterns of those who have been working from home? If they do not return to the office full-time what is the impact on those businesses who service those office workers? What will be the employment prospects of those who work for those businesses?

Of course, if their spending patterns are different to those they held before the pandemic where will they spend after the pandemic?

This is important because we are a consumer-led economy. During the pandemic we have seen a large shift of consumer spending from the high street to online. How will this change as the economy re-emerges?

Whilst watching, I began to ask myself what impact will pensioners have on the economy? They are a special component as they consume far more than they earn.

So how has the pandemic affected their finances? Firstly, we must remember that employment income is a large component of pensioner household income. We should not generalise but what working pensioners do you come across every day? Employment income forms a large part of pensioner household income, particularly in lower earning groups.

The over 50s are the second largest group after the young to have become unemployed. Those pensioner households that depend on employment income will find it difficult to replace.

As mentioned, we are a consumer-led economy. Consumers include pensioners, in fact how many businesses chase the ‘grey pound’? Sources of income for most pensioners consist of State and private pensions. These have been increasing while during the pandemic the opportunity to spend has reduced.

We will probably find that many pensioners have become involuntary savers. What will they do with their unintended saving? As the economists say, there are only so many meals out you can have. What is more, those pensioners that have acquired additional savings will also own their own homes. Thanks to the stamp duty holiday house prices have gone up more than they perhaps would have done. This should add to their confidence.

For some, this confidence will stretch to confidence to spend more than the additional savings they have acquired. The confidence could lead to borrowing in retirement.

While most deaths and illnesses have been among the retired population, the economic impacts have hit many of their children hard. Can the retired population provide them with a helping hand?

That house extension or refitted kitchen they have talked about - is it now or never? How about that garden makeover? Is now the time? Confidence gives rise to these types of conversation.

Pensioners who use their increased wealth in this way will also be helping the economy get back on track. They, and those involved in the later life lending market, may find they are a bigger component in revitalising the economy than many economists expect.