The cost of living, a stock market crisis and running out of money are dominant financial concerns among retired people, a new survey reveals.
Workers nearing retirement are also worried about their savings running dry and the cost of living, it found.
The results of a mammoth study of retirement attitudes among mostly well-to-do savers reflect the major behavioural shift towards people investing their pensions to provide an income in old age, rather than depending on guaranteed payouts from an annuity or final salary pension.
Stock market risk: Findings reflect the major behavioural shift towards investing pensions in old age rather than buying annuities
Retirees who took advantage of freedom reforms to tap their pensions and live off their investments since 2015 have seen a few market upsets, but not yet weathered a major market storm.
Some 10,000 older people took part in a survey, carried out by the Interactive Investor website, which probed their views on topics including wealth, inheritance and younger generations.
II says the study blows a hole in the cliched image of retirement that depicts a tanned, silver-haired, smiling couple on a golf course or cruise ship.
Two thirds of participants disagreed that retirement was a time of pleasure and financial worries loomed large in the findings, it notes.
Moira O’Neill, head of personal finance at II, says the findings offer a more nuanced picture of what retirement and the run-up to it really look like.
‘Holidays and travel, and having more time for friends, family, hobbies and voluntary work, are all top priorities for both men and women – but there are some big secrets too, with half of couples having no clue how much debt their partner has.’
She adds: ‘Many want to have their cake and eat it – but it is women in particular who are more likely to be left with just the crumbs.
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‘Overwhelmingly, this research puts real flesh on the bones of the gender pension gap and it is concerning.
‘The inescapable truth is that many women are facing a retirement of financial hardship which is having a real and lasting impact on their quality of life.’
II made the following findings.
Among retirees, 50 per cent are concerned about the cost of living, 42 per cent about a stock market crisis, 36 per cent about affording healthcare, 35 per cent about running out of money, and 24 per cent about tax issues.
Meanwhile, for those yet to retire, the top financial concern was running out of money, with 26 per cent worried about this, 23 per cent about the rising cost of living, and 10 per cent about not being able to afford social care – with stock market hazards further down the list at 8 per cent.
Money and social attitudes: Survey probed the views of older people on topics including wealth, inheritance and younger generations
Leaving an inheritance was a top priority for 35 per cent overall, but 26 per cent had not written a will, while 25 per cent had one but admitted it needed reviewing.
Some 70 per cent of retired participants had not set up lasting power of attorney – an important legal step allowing loved ones to take over your finances if you fall ill – rising to 88 per cent among those not yet retired.
More than half of those surveyed did not know how much debt their partner had and almost a third didn’t know how much they earned.
But that fitted with many running their finances at least partially apart, some 26 per cent of couples keep separate bank accounts, whilst 18 per cent have just a joint account and 56 per cent have a combination.
The report said that 17 per cent of women feel confident about maintaining their standard of living in retirement, compared with 30 per cent of men.
However, men are more than twice as likely as women to carry on working in retirement because they enjoy it (34 per cent versus 14 per cent), while women are twice as likely to stay in work due to financial necessity (41 per cent versus 20 per cent).
Dealing with financial issues was considered a chore by 34 per cent of women compared with 15 per cent of men.
Not starting a pension sooner was the biggest financial regret for 17 per cent of participants. And among those not yet retired, 32 per cent regret not saving enough more generally, and 12 per cent that they sat on too much cash instead of investing it.
Lifestyle goals: Having more time for friends and family is one of the priorities for retirement
When it comes to the generational divide, 51 per cent said younger generations have a tougher time financially than they did, and 29 per cent thought the opposite.
But 66 per cent of those without a final salary pension – which provides a guaranteed income in old age – have a vague or no idea about what their income in retirement will be, compared with 44 per cent of those who have one.
Participants in the Interactive Investor survey included its customers, readers of its money publications and visitors to its website. II says they were skewed towards the better off – its customers have an average of £100,000 available to invest.
What does II recommend based on its findings?
The firm is calling on the Government to do the following.
1) Tackle inequality early with more dedicated, joined up and resourced financial education in schools.
2) Combat pension inequality throughout people’s lives by introducing pension ‘wake up packs’ not just at 50, but at key life stages such as the start of a new job or birth of a child.
3) Get auto-enrolment working better for everyone by lowering the minimum age limit from 22 to 18 sooner rather than later, not the mid-2020s as currently planned.
4) Change the qualification rules for the £10,000 auto enrolment earnings threshold to cover people working for multiple employers, helping those – mostly women – who might have several part-time jobs.
5) Launch a public education campaign aimed at women to help kick start a savings and investment culture.
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