Examining people’s approaches to financial planning for later life suggests five distinct personality types exist. The 65% who are struggling to save fall into three categories: one in three (30%) are ‘hassled and overstretched’, nearly one in five (19%) are ‘in denial’ about the issue and a further 16% are ‘lost and confused’ about the steps they need to take.
Just 16% of adults show signs of being ‘savvy and sorted’ by taking a conscientious approach to saving for retirement. A further 19% are ‘cautious optimists’ who appreciate the need for action and are confident they still have time to prepare.
Recent data published by the Office for National Statistics showed that while 76% of UK households currently save into a pension, the amount of savings needed to fund a regular retirement income has grown substantially since December 2009.
In 2013, a savings pot of £458,300 is needed to receive an annual retirement income of £15,000: 29% more for men than was needed in 2009 (when the savings target was £354,100) and 14% more than for women in the same year (when they needed £400,600).
The Council research also reveals nearly one in ten (8%) UK adults believe they will eventually have to sell their homes as they will no longer be able to afford to live there in retirement.
With rising house prices and tight lending criteria continuing to limit access to the property ladder, almost one in five (18%) doubt whether they will even own their own homes by the time they retire.
However, nearly one in three (32%) adults see their home as a potential financial asset in retirement, as well as somewhere to live, in case they ever need to release equity to boost their savings.
Nigel Waterson, Chairman of the Equity Release Council said:
“With people’s budgets under pressure right now, it is perfectly understandable why many prefer to focus on the present and not dwell too much on their financial future, especially if their outlook for retirement is less than sunny.
“Unfortunately, that inaction could prove costly in later life. Seeking out professional advice on a range of retirement products – from pensions and annuities to equity release – can help to identify the best way to make their financial assets work for them in later life.
“Even without factoring in the current rise in prices, housing wealth is often the logical choice to provide a financial comfort blanket during retirement. Rather than worrying about being forced to sell off what is their most sizeable asset, homeowners can look on their property as a valuable investment that can grant them peace of mind through the safe withdrawal of housing equity.”
Stephen Lowe, director at retirement income specialist Just Retirement said:
“Our experiences are very similar to those reported by The Equity Release Council. In the consumer research study Just Retirement commissioned into people’s attitudes towards using housing equity, we found a significant gap between expectations of those approaching retirement and the reality of their financial situation, there is also lack of knowledge about the options people have, including equity release.
As people start to understand the significant gap between their finances and what’s needed to deliver an acceptable retirement, increasing numbers are becoming positively disposed to using housing equity. It is important people considering using housing equity seek professional financial advice in order to fully understand the options available and the implications of different routes.”
Steve Lewis, LV= Head of Distribution comments:
"The Council's research into retirement savings reflects what we are seeing at the coalface. The pension income gap has certainly changed the shape of retirement. We have seen the number of over 50s planning to work past state retirement age increase by 43% since 2010, with people working for a further six years past state retirement age on average. Our Working Late Index found that almost 4.3 million over-50s retired and then subsequently returned to work, with 14% stating that it was due to their personal pension being insufficient. However, for some retirees returning to work is not a viable option.
"In recent months we have seen several high profile discussions highlighting the role housing equity is likely to play in funding retirement. For many people their property is their greatest asset, and so we expect to see an increase in the number of retirees using it to cover a pension shortfall."
