- Real retiree living costs could leave a state pension shortfall of £340 per month per person
- UK retirement plans see reliance shift towards workplace pension schemes
- 1 in 10 to rely on children and relatives to help financially in retirement
- 85% haven’t factored in the costs of elderly care to their future financial plans
- Age Partnership has released their 2018 Whitepaper on the state of UK retirement finances
Is the UK retirement ready? A newly released report[1] sparks cause for concern, revealing the nations lack of financial planning for retirement.
1 in 4 retirees are currently struggling with money, and 1 in 3 (38%) retirees say they underestimated how much money is needed to live comfortably in retirement. So, we need to make sure future generations are better educated on the subject.
For 2018, Age Partnership have launched their industry Whitepaper, surveying British adults of all ages and analysing industry research to find out the real state of the UK’s retirement finances.
Is the UK on track to suffer a financial shortfall?
Real retiree living costs are currently £208 according to the whitepaper, however basic state pension is £122.30 per week[2]. Leaving a deficit of £85 per week. That’s £340 per month retirees need to find from other sources.
It’s no wonder then that the non-retired population are looking at other ways to raise funds for life after work. The further away Brits are from retirement the less likely they are to rely on state pensions, this could be as 39% are worried that the Department for Work and Pensions implementing policy changes that affect their funds.
Retirement planning
The workplace pension will be used by half of future retirees. 50% of those approaching retirement in the next ten years will, and 49% of those not approaching retirement yet are also already planning to use one. Those who are not retired contribute on average 3.5% of their salary which is being matched by employers (3.6%).
The survey findings showed that the further you are from retirement, the less likely you are to have a private (or “personal”) pension plan though. According to the FCA, 15.1 million adults in the UK that aren’t retired are not paying into a pension[3].
Property is another popular choice for funding retirement, with 1 in 10 planning on downsizing, and 1 in 20 planning to use equity release. The average Brit approaching retirement in the next 10 years plans to raise £62.1k from downsizing and £61.1k from equity release.
The Equity Release Council reports that equity release is an increasingly popular way for retirees to raise funds, their Autumn 2017 market report showed that the number of products on the market has increased 225% in the last decade[4]. Yet with younger Brits struggling to get on the housing market, this raises questions about whether growth can continue.
Worries, concerns and expectations
1 in 5 of Brits (who are more than 10 years away from retirement) however, said they don’t know how they will fund it yet, though Age Partnership’s experts think the sooner you start preparing the better.
Early planning can help reduce worry around retirement and manage expectations regarding your lifestyle and what you need to be putting away each month. Some of the biggest concerns for Brits included…
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Standard of living and inflation
- 68% of non-retired people say they expect to live off the same income or higher when they are retired. However, many already describe themselves as struggling financially.
- With the increasing cost of living in the UK it’s no wonder that 54% of Brits are worried about inflation and its effect on their pension savings.
- Ageing population
- 40% are worried that the balance between the working population and the retired population is not sustainable enough to fund retirement through the state.
- 2016 stats show that 11.8 million Brits were over 65 and this is only set to increase according to the Pension Policy Institute. By 2050 it could be as high as 16.8million, that’d be 36% of the working age population. [5]
- Increased life expectancy is also a worry, 38% are concerned they don’t know how long their retirement may need to last.
- Over half (57%) of people in the UK are concerned about the costs of elderly care and the lack of funding. They worry about the costs associated with deteriorating health such as paying for a carer or assistance and how this could deplete their retirement savings.
- 85% haven’t factored in the costs of elderly care to their future financial plans
- According to NHS and Age UK’s 2015/16 figures, there were 1.31 million new requests for social care support from older people.[6]
- Cost of care
Justin Wysocki, Marketing Director from Age Partnership said,
“The research in this whitepaper clearly shows that there is unease in the UK when it comes to retirement finances. The uncertainty around how to prepare when younger and the best way to use our assets can be daunting.
That’s why we launched this campaign, to highlight the importance of being educated and aware on retirement issues. Whether you’re already retired, approaching retirement or even if it feels a million years away. Early preparation is key to ensure you can live comfortable after work.”
Further advice on financial planning in retirement can be found on the Age Partnership website.
Whitepaper: https://www.agepartnership.co.uk/
Equity release: https://www.agepartnership.co.uk/equity-release/
Contact: https://www.agepartnership.co.uk/contact-us/