It is a myth that baby-boomers are better prepared for retirement, with the over 50s less likely than younger savers to have a plan in place for unexpected financial problems according to new research
This survey by Barnett Waddingham highlights a lack of financial preparedness, particularly among those in the latter years of their working lives. It adds that the research also shows how many in this age group focus on their own personal income, rather the needs of their immediate family, which have the potential to upset carefully laid financial plans.
Overall, the research found that only a fifth of all savers in the UK (19 per cent) have fully considered the financial repercussions of getting a serious illness in their retirement plan.
Yet surprisingly, it’s the under-50s driving this; 25 per cent have prepared, versus just 16 per cent of over-50s. Meanwhile 43 per cent of this older age group have ‘thought about it’ but not included it in their retirement planning, and almost a third (32 per cent) have not considered it at all.
Similarly, just 17 per cent of all respondents have considered the possibility of having to go into care and reflected that in their retirement plan – made up of 14 per cent of over-50s, and 22 per cent of under-50s.
Again a slightly higher number (39 per cent) of over-50s have thought about it but not included it in their planning, while 35 per cent haven’t considered it at all.
Barnett Waddingham points out though that around 300,000 over-65s living in care homes in England and Wales, at a average cost of about £60k a year, so this is an important facet of planning for later life.
Most people who are married or in civil partnerships have also not adequately planned for changes to their marital status — which again can seriously impact finances and retirement plans.
Just 18 per cent of married people have fully planned for the possibility of becoming widowed, while 40 per cent have considered it but not planned for it, and 31 per cent have not considered it at all.
For those in a relationship, only one in 10 (10 per cent) have financial plans for getting divorced or breaking up. This number reduces to 7 per cent of over-50s, compared to 16 per cent of their younger counterparts. A total of 37 per cent of these older savers said they had not considered this, and 39 per cent say it wouldn’t be possible.
Barnett Waddingham says it is not just romantic relationships which have the potential to impact retirement – families can have a dramatic impact on spending and saving plans. A fifth (21 per cent) of parents have fully planned for their children needing urgent financial support during their retirement. This is once again driven by the under-50s at 30 per cent, and is true of just 16 per cent of parents over 50.
In the other direction, 12 per cent of UK employees said they have planned for their parents needing urgent financial support while they’re retired – including a fifth (20 per cent) of those under-50, but just 7 per cent of over-50s, although this figure is skewed by a higher proportion in this group who may no longer having living parents.
Some of this lack of shock mitigation could well be driven by an introspective approach to pension planning. Overall almost a third of British employees mostly think about themselves — their own personal income and spending — when planning for retirement.
But a higher proportion (36 per cent) think about their relationship, the income and spending of them and their partner/ spouse. Meanwhile a quarter (25 per cent) think about the wider family unit, including children.
However older workers are more likely to think about themselves first according to this research.
Barnett Waddingham head of DC Mark Futcher says: “Poor planning is almost as bad as not saving. Both risk retirees being left high and dry later in life. The evidence shows we’re at risk of waving goodbye to a lost generation of retirees, cut adrift by insufficient planning, a myopic attitude to the harsh realities of financial shocks, and an unwillingness or inability to ask for help. There is time to avert this looming crisis, but there really is no time to lose.
“The industry needs to urgently engage and educate people, especially those in their 50s and above. It’s not just about instilling in them the importance of planning, but about making sure they have the necessary tools to do so and a true understanding of the hurdles ahead and their familial financial ecosystem.
“Pension providers are the most popular place for advice for over-50s, which means they have an urgent responsibility to offer fulsome, understandable, and targeted support.”