Britain’s over 50s are struggling more than ever to keep up the level of savings needed to fund a comfortable retirement lifestyle, according to the annual State of Retirement report [1] commissioned by investment, pensions and insurance group LV=.
ERICs (Experiencing Retirement Income Concerns) worried and not saving
Research among 1,500 over 50 year olds found that seven in ten (69%) of those yet to retire are even more worried about their retirement prospects than a year ago. But despite an increased number since last year of ERICs – people who are Experiencing Retirement Income Concerns– just 7% of over 50s have felt able to increase their level of long-term savings. And the financial pressure of recession has forced one in five (20%) to reduce the amount they are setting aside for retirement by an average of £137 a month.
The economic climate has already had a significant impact on older workers’ retirement plans. Around two million people [2] (22%) claim they have had to put back their retirement date due to the recession, while a quarter (25%) say they have no clear idea when they will be able to give up work.
Food and utility costs
Everyday costs such as food and utility bills are the biggest specific concern among ERICs, with seven out of ten (70%) worried by these costs. In addition, 61% say they are disturbed by how little their savings may grow due to low interest rates, while more than half (51%) are anxious about the reduced income their retirement savings will buy them. Over 5m ERICs (56%) say the recession itself is a major cause of their income concerns.
The report also finds that over 50s have more than just their own finances to worry about. Four in ten (41%) say they give financial support to other family members, and 31% of this group say this is a recent development, resulting from the credit crunch.
Mike Rogers, LV= Group Chief Executive, said:
“Already one in ten of the UK’s over 65s are not fully retired, and this figure could rise rapidly unless those nearing retirement take steps to increase their savings. In the midst of recession, it is understandable that people are focusing more on their everyday costs and on supporting their families. But it is still worrying that one in five has felt forced to reduce their savings towards retirement at this important time.”
Budget blues
Nearly half of the over 50s (9.6 million people) believe they will be financially worse off as a result of the April 2009 Budget changes, despite the Government’s pledges to protect pensioners. A further 15% admit they do not know how the Budget will affect them, with only 4% believing it will make them better off.
Of the over 50s, 6.6 million complain it is difficult to keep up with changes in financial legislation (72%), with this confusion being greatest among those closest to retirement.
Looking to the future
The LV= report reveals that less than a third of over 50s (30%) have a clear idea of the value of their pension pot, and only one in four (27%) claim to know how much their retirement savings are worth. A quarter of over 50s (25%, 2.3m people) expect to rely solely on the basic state pension in retirement [2], and this rises to one in three women (32%).
When asked to comment on their likely retirement lifestyle and expenditure, almost half (48%) said their overall expenditure would fall, while only one in five expect to spend more in retirement than they do now (22%).
Doing without advice
Despite such widespread concerns about their financial security in retirement, just one in five over 50s (21%) have consulted an independent financial adviser (IFA) for retirement planning advice. This rises to 27% of those within five years of the statutory retirement age.
More than half have taken no financial advice whatsoever (61%), with a similar number saying they trust their own judgement to make the most of their financial situation.
Top topics of retirement planning advice sought
Mike Rogers concluded:
“With a large majority of older workers more concerned than ever about when they will be able to retire and how much money they’ll have, it is vital they review their options. There are now many more investment and income generating options than there used to be for people approaching retirement, but too few are taking advice. As a result millions may miss the opportunity to secure a comfortable retirement.”
- The rise of ERICs: Seven in ten over 50s (69%) are Experiencing Retirement Income Concerns.
- Despite long-term saving shortfalls, one in five (20%) have had to decrease their monthly savings level by an average £137 over the last year.
Notes
1. All figures taken from omnibus research carried out by Opinium Research as part of the State of Retirement Report. An online poll of 1,551 British adults, all aged over 50, was carried out from 30th April to 5th May 2009.
2. The over 50s population in the UK is 21,290,000 (Source: Population projections by ONS, 2008). All grossed up figures are based on this source.
