The report, written in conjunction with Dr Liam Foster of the University of Sheffield’s Department of Sociological Studies, suggests that British retirees know they face a tough future but haven’t made the necessary provision to counter it.
Part of this lack of preparation could come from the fact that more than two thirds (69%) people retired sooner than they expected, mostly due to ill health, redundancy or offers of early retirement. If retirement is being enforced or is unavoidable, individuals are likely to be less prepared, and 58% respondents admitted to having not sought any professional financial advice in advance. Equally worrying is that 45% have never calculated the pension benefits they would receive in retirement and of those that did seek professional help, one in seven (14%) waited until just before they retired.
The report also highlighted that, critically, 40% of pensioners have said they would need more money in order to feel ‘comfortable’ in retirement.
This lack of professional advice and forward planning has meant that:
• just over 40% have been forced to cut back on their lifestyle in retirement
• amongst those who have cut back, luxuries such as holidays through to essentials like food and heating have suffered
• a third reported that they are having trouble making ends meet and are feeling anxious about money.
For those who said they would need more money, 60% said they needed £4,000 or more a year. When faced with buying an annuity, significant additional funds would be required to buy such an amount, particularly if some degree of inflation-proofing or dependant’s benefit was also needed.
Simon Smallcombe, head of guaranteed distribution for AXA in the UK, comments: “It’s very concerning that despite people knowing their purchasing power will reduce, they aren’t doing anything about it. Seeking professional financial advice is the only way to ensure you have plans in place that are flexible enough to see you through what can be a long retirement journey.
“Retirement is supposed to give you the freedom and opportunity to pursue leisurely interests, so to see food and heating bills presenting a problem is a worrying situation for today’s baby-boomers. Retirement planning should be an ongoing process that can adapt to changing circumstances using a combination of products; perhaps with guaranteed products forming a core income, supplemented by capped or flexible drawdown as well as income from other tax wrappers as required. Advice is not just something you seek a few months before your last day at work.”
Dr Liam Foster comments: “It is common for people’s expected income in retirement not to be matched by realistic financial preparations. This situation is exacerbated by the British pension system being one of the most complicated in the world. Therefore, suitable advice, information and planning have an important role to play in encouraging appropriate pension saving for retirement.”
|
