Age UK calls for regular financial MOTs for those in and approaching retirement.
- Up to 20 per cent of people aged 50-64 show very low readiness for ageing
- Financial services must be more honest and transparent about products and long-term investment returns
- Government and regulator should ensure key financial services are available for older people if the industry does not provide them voluntarily
- Growing need to guard against scams now people don’t have to buy annuities.
Regular financial check-ups for the retired and people approaching pension age are critical to help the growing number of people aged 60 and over navigate later life, says Age UK’s Financial Resilience in Later Life report being published today.
Ill health, divorce, care needs and the death of a partner can derail financial plans overnight. Combined with retirement, which now routinely lasts 30 or 40 years for a growing number of people, the report says we need a new approach to financial planning that concentrates on building resilience rather than developing a single ‘plan’ for retirement.
Age UK believes periodic financial MOTs and guidance in the lead up to retirement and in retirement are essential to ensure people are more financially resilient and better able to weather what life throws at them.
These 'road-checks' are particularly important for those with modest savings, many of whom will not have used traditional financial advice. Latest figures show that two thirds of people in the UK do not take professional financial advice – marginally down on figures for 2012.[i]
The report is the culmination of Age UK’s Financial Services Commission, a series of three summits involving industry leaders, Government, consumer advocates and older people. Inspired by Lord Filkin’s warning last year that Government and society are 'woefully unprepared for the UK’s ageing population', the Commission’s objective was to devise ways to help people manage and prepare for retirement now that they are living longer than ever.
Tom Wright, Age UK Group Chief Executive and Co-chair of the Financial Services Commission said: 'With retirement now often lasting thirty or forty years – a third of your life - we’re in critical need of a radical new approach to making later life financially secure and comfortable.
'The concept of making one set of retirement plans at pension age is not fit for purpose.
'We believe a series of financial MOTs at significant points throughout retirement, together with a robust state and private pensions system, is the real way to help people make ends meet and live comfortably.
'We hope the financial services industry, regulators and Government who worked with us during the Commission will now act on the blueprint we’ve laid out as a result of our discussions so that people in Britain can feel financially prepared for and confident about their later lives.'
Research shows that there is widespread concern about finances in later life. Age UK research reveals that almost two million people in England (20 per cent) aged between 50 and 64 – the so called “baby boomers” – people born between 1946 and 1964 – show very low readiness for ageing in terms of financial resources and health.[ii]
While the introduction of automatic enrolment into a workplace pension has been a vitally important step forward, the current generation coming up to retirement will not fully benefit. One fifth of men and two fifths of women have no private pension at all[iii]. And half of all women have a private pension worth less than £22,000 – equivalent to just £1,300 a year.[iv]
Pensions Minister Steve Webb, said, “Helping people make better provision for their retirement is one of the most important long-term issues this Coalition Government has had to address. Implementing policies such as automatic enrolment into workplace pensions, and legislating to introduce the fairer, simpler New State Pension from 2016 will make a massive difference to the prospects of future pensioners.
'But the work doesn’t stop here – and I welcome Age UK’s role in spearheading the debate on what more we can do. The Pensions Bill which will be introduced into Parliament shortly will be a vehicle for the Government’s ongoing pensions revolution, and I look forward to driving through Parliament a number of further measures which will reflect the realities of our ageing society.'
Age UK’s report also calls for more honesty and transparency in financial products particularly around investment returns.
An analysis of 50-64 year olds in the UK by BritainThinks for Age UK found that this generation, many of whom have weathered pensions and endowment mortgage scandals and more recently PPI mis-selling, have a low level of trust in financial institutions and a general feeling of being let down. It found while some people in this age group do not know where to go for sound, impartial financial advice, many of those who are less financially secure are opting for a “fingers crossed” attitude to the future.[v]
Compounding this is a significant lack of appropriate financial services to help older people maximise their income through retirement. Particularly excluded are the 1.4 million people aged 85 and over[vi], the fastest growing segment of the UK population,
Age UK regularly hears reports from people in this age group who have problems accessing their money; are prevented from buying certain financial products because of their age or find themselves left in savings accounts paying paltry rates of interest.
If the industry is unwilling to cater for increasingly older customers, Age UK believes it is incumbent on the Government and the regulator, the Financial Conduct Authority, to take action to ensure older people are not locked out of financial services.
Age UK is also warning that there is likely to be a growing risk of scams following the Budget announcement that pensions will no longer have to be converted into annuities from April 2015. With a growing number of older people considering alternative ways of investing their savings, there is likely to be an accompanying increase in bogus investment schemes.
Dr Alexander Scott, Chief Executive of the Chartered Insurance Institute and Co-Chair of the Financial Services Commission said: 'We have been delighted to work with Age UK in the development of this Financial Services Commission, and play a key role in promoting an active and open debate on these vital issues. We support the findings of this Commission which are consistent with both our views and the long-term objective of raising public trust and confidence and building a long-term savings culture to address demographic changes the UK faces.
'We are pleased that some of the material discussed in this forum has already influenced the government’s thinking on reforming at-retirement choices. The Chancellor’s retirement reforms published in March in many ways reflected the conclusions in some of our sessions, and the idea for a Guaranteed Guidance service was similar to a finding from one of the roundtables.
'I hope this CII-Age UK partnership continues and we especially look forward to working together on further robust and innovative research and thought leadership to provide the necessary evidence base for these emerging policies.'
Financial resilience in later life (PDF 980 KB)
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Notes to editors
Media contact: Mallary Gelb
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- The RDR and Consumers, Personal Finance Society, February 2014
- Generation R – risk resilience, ready for ageing, Age UK, 2014
- ONS 2012, Chapter 4:Pension Wealth 2008/10
- https://www.moneyadviceservice.org.uk/en/articles/retirement Mid-range quote for flat rate, single life annuity with no lump sum for someone approaching 65. November 2013
- Generation R – risk resilience, ready for ageing , Age UK 2014
- Mid-2012 Population Estimates UK Office for National Statistics, 2013
We work with our national partners, Age Scotland, Age Cymru and Age NI and our local Age UK partners in England (together the Age UK Family). We also work internationally for people in later life as a member of the DEC and with our sister charity Help Age International.
Age UK believes that everyone should have the opportunity to make the most of later life, whatever their circumstances. We provide free information, advice and support to over six million people; commercial products and services to over one million customers; and research and campaign on the issues that matter to people in later life. Our work focuses on five key areas: money matters, health and well being, home and care, work and training and leisure and lifestyle.
Age UK is a charitable company limited by guarantee and registered in England (registered charity number 1128267 and company number 6825798). Age Concern England and Help the Aged (both registered charities), and their trading and other associated companies merged on the 1st April 2009. Together they have formed the Age UK Group (“we”). Charitable services are offered through Age UK and commercial products are offered by the Charity’s trading companies, which donate their net profits to Age UK (the Charity).