Pensions - Articles - One in four Scots risk being pension poor

 More than one in four Scots (29%) expect to come under pressure to lend their family money from unlocked retirement pots when the new pension freedoms are introduced in April, according to the latest research from the Centre for the Modern Family.

  

 The new report, Forever Young: The New Landscape of Later-Life Planning, from the Scottish Widows think tank revealed that the new pension reforms could have a knock-on effect on intergenerational finances, with more than a quarter (27%) of Scotland’s adults expecting to use pension savings to fund care costs of elderly relatives or to invest on behalf of the wider family – e.g. in a property for children (17%).

  

 Almost one in four (24%) Scots believe the reforms will enable people to manage savings more effectively. However, they are outnumbered by the 43% who worry that the reforms could mean not having enough money for the whole of their retirement.

  

 Despite feeling the pressure to give up their retirement savings, 42% of Scots say they don’t know or haven’t thought about how they will survive financially in retirement. A further 14% intend to rely on State support, which could leave many financially exposed in later life.

  

 Budget reforms most acute for full nesters

 The effect of the government’s pension reforms may be particularly burdensome on particular groups in the UK, especially those with adult children still living at home, or ‘full nesters’, who were identified as a particularly financially strained group in the Centre’s previous report, Meet the Full Nesters.

  

 One in four UK full nesters think they will come under pressure to use pension savings not spent on an annuity to fund care costs of elderly relatives (25%), compared to 19% of empty nesters. Full nesters were also the most likely to feel under pressure to use their retirement savings for investments on behalf of the wider family (25%).

  

 Almost a third of full nesters (29%) expect retirement savings to be used for loans to other family members, compared to 27% of empty nesters.

  

 Family give and take

 The report also found Scottish families are pulling together to support one another at different stages of life, and parents are increasingly looking to their children to plug the gap that loans and investments from an unlocked pension pot may leave in their retirement savings. Over a third (39%) of Scots feel that support from children in later life is repayment for what they have provided, and 41% also believe that children have an obligation to support their parents.

  

 This support stretches to caring and living arrangements, with 40% of Scottish adults expecting to care for their parents and one in 20 (6%) expecting parents to live with them.

  

 Carolyn Fairbairn, Chair, Centre for the Modern Family, said:

 “The reforms to the pension system announced in the 2014 Budget are transforming the retirement landscape. Although for many they will represent greater autonomy over how to use their savings in later life, it is important to consider the knock-on effects on families. Many may feel pressure to access their pots to support struggling family members in an already challenging economic environment

  

 “While it is reassuring that family members are seeing the importance of pulling together in this way, it is vital people are aware of all the short and long-term implications for retirement pots, and for policy makers and insurance companies to help people make an informed decision about how to best use their savings and manage their income in retirement.”