Older savers, people aged 50+, are failing to plan for potential shocks in retirement, according to research from consultancy Barnett Waddingham.
The study shows that workers aged 50+ consistently underperform younger pension savers when it comes to financial planning for ill-health, relationship shocks, and the possibility that their wider family might need urgent financial support.
Researchers said that the main reason for this was that older pension savers were more focused on personal income and spending.
Only a fifth of all savers in the UK (19 percent) have considered that they might get a serious illness in their retirement. In fact, the research found that people aged under 50 were more concerned about planning for this possibility. A quarter of younger savers have prepared for this compared to 16 percent of over-50s. More than two-fifths (43 percent) of this older age group have ‘thought about it’ but not included it in their retirement planning, and close to a third (32 percent) have not thought about it at all.
Only 17 percent of all respondents said they had planned for the possibility of having to go into care in retirement. Within this group, 14 percent were over-50 and 22 percent were under-50. Almost two-fifths (39 percent) of over-50s have thought about this but have not included it in their financial planning, while 35 percent have not considered it at all. But researchers said that with around 300,000 over-65s living in care homes in England and Wales, at an average cost of about £60,000 a year, it’s an important element of planning for later life.
Marriage and relationships
Most people who are married or in civil partnerships have also not adequately planned for changes to their marital status. Just 18 percent of married people have fully planned for the possibility of becoming widowed, while 40 percent have considered it but not planned for it, and 31 percent have not considered it at all.
Among people in a relationship, just 10 percent have financial plans in place for getting divorced or breaking up. This drops to 7 percent of over-50s, while 16 percent of younger employees have plans that would help them manage such an eventuality.
Family ties
Changes in your wider family can have a dramatic impact on retirement spending and saving plans. A fifth (21 percent) 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 percent, with just 16 percent of parents over 50 considering this.
When it comes to looking after your own parents, 12 percent of employees have planned for their parents needing urgent financial support while they’re retired. Within this proportion, a fifth are under-50 and just 7 percent are over-50.
There are many over-50s who may no longer have parents. More than half (52 percent) of this age group said their parents needing urgent financial support wouldn’t be possible or isn’t something they need to consider. However, 18 percent have thought about it but not included it in their plan, implying a possibility of need.
Self-interested pension planning
Researchers said that the lack of planning to manage potential shocks in retirement could well be down to an introspective approach to pension planning. Almost a third of employees mostly think about themselves – their own personal income and spending – when planning for retirement. More than a third (36 percent) mostly think about their relationship – the income and spending of them and their partner or spouse. And a quarter think about their wider family, including children.
Workers over-50 are more likely to think about themselves first. A quarter said they plan for themselves, compared to 29 percent of under-50s. Older people reported being more likely to think about their relationship than younger people (39 percent vs 32 percent), and older people were less likely to think about their wider family and children than younger employees (20 percent vs 32 percent).
Other demographics influence people’s retirement plans. For example, parents are more likely to think about their wider family than non-parents (29 percent vs 18 percent), and women are more likely than men to think about family needs (28 percent compared to 22 percent).
Ethnic minorities are almost twice as likely to plan with their wider families in mind than white people, at 38 percent compared to 23 percent. This is driven specifically by black employees, almost half of whom (46 percent) plan as a family.
Mark Futcher, head of DC at Barnett Waddingham, said: “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.”
