Independent Financial Advisers Glasgow News & Guides

The LV= State of Retirement Report has revealed that 6.25 million Britons aged over-50 (28%) have no pension plan in place and look set to rely on just the state pension in retirement, a huge increase on the 1.2 million people who live solely on the state pension today.

The basic state pension equates to an annual income of up to £5,587 and averages at £9,672 a year when you take into account additional benefit income (e.g. additional state pension, pensions credit etc). This is up to 51% lower than the income someone in the UK working full time on the minimum wage would earn, which is £11,477 per year.

Even with Government plans to introduce a Universal State Pension at £140 per week, this will still provide an annual income significantly below the minimum wage.

When asked if they could live on the equivalent of the minimum wage in retirement, 43% said they couldn't live on that alone and over a quarter (27%) said they would really struggle.

For those who have private pension savings, the average income in retirement is currently £7,488 a year. When this is combined with the state pension many people are still only living on marginally more than the minimum wage.

Over half (58%) of those set to retire within five years have become more concerned over the last year about their financial situation and their level of savings for retirement. The biggest worry is the rising cost of food and utilities (76%), followed by the general poor state of the UK economy and national debt (63%). The effect of low interest rates impacting savings (61%), high inflation (61%) and the recent reforms to UK pensions (44%) are all major causes of concern pre-retirees.

Two in five (40%) people planning to retire this year would be happy to work past 65 if they had the chance, according to new research from Prudential.

The main motivation for more than two thirds (68%) of this year’s retirees who want to stay in the workforce past 65, is a desire to remain physically healthy and mentally active, while 39% do not like the idea of retiring and just staying at home. More than half (54%) claim that they enjoy working.

However, despite wanting to stay in work, only 13% would choose to continue to work full-time with their current employer. Nearly half (49%) of those retirees who want to work past 65 years old would prefer to work part-time, either with their current employer or in a new role, in order to strike a better work life balance.

More than one in 10 (11%) of entrepreneurial retirees would consider starting their own business after the age of 65 or earn money from a hobby in order to keep working. Five per cent would work as charity volunteers.

Recent ONS figures show that average retirement ages are rising, with men now retiring at an average age of 64.6, compared with 63.8 in 2004, and women working until 62.3 years compared with 61.2 previously.

The top priority for people intending to retire this year is saving money to ensure they have enough to live on in retirement. Nearly six out of ten people (57%) said saving will be a top priority, according to new research from Prudential.

The insurer’s Class of 2012 study, which looks at the finances and expectations of those planning to retire this year, also found that women are more likely than men to prioritise saving during retirement – 62% of women will make this a priority compared with 52% of men.

Although saving money is a key focus, those intending to retire this year are still determined to have a fun-filled retirement. More than a third (36%) say that spending money on travelling the world will be a priority for them, while 43% will make spending money on enjoying themselves a priority.

Vince Smith-Hughes, retirement income expert at Prudential, said: “Today’s retirees are likely to spend longer in retirement than previous generations so it is encouraging to see that they understand the importance of saving money to ensure they can live comfortably. Saving shouldn’t be regarded as something that suddenly stops once you retire, and the current generation of retirees seems to be more aware of this than ever before.

“Saving as much money as possible, from as early an age as possible, is the best way to ensure you can afford a comfortable lifestyle in retirement. Consulting a financial adviser can also be an important step in helping retirees to make the most of their pension pots.”

The Pensions Policy Institute has published new research which considers the implications for retirement income of Government policies to extend working lives.

The research examines how much longer today’s over 50s in England in 2011 might need to work and save to meet target levels of retirement income.

Commenting on the findings of the research, Niki Cleal, PPI Director, said:

“The research found that the vast majority of the over 50s who are working in 2011 - around 85% - might have sufficient state and private pension income to meet a minimum acceptable standard of living in retirement of £11,000 per annum if they continue to work and save until they are eligible to receive their state pension. However, for many people an income in retirement at this level is unlikely to be considered adequate.”

A smaller proportion of today’s over 50s are likely to be able to have a high enough retirement income to replicate the full standard of living that they enjoyed during their working life.

Niki Cleal said:

“On a positive note, around 40% of today’s over 50s who are still working might have sufficient state and private pension income to have a retirement income that would allow them to replicate their full living standards in working life, if they continue to work and save until they are eligible to receive their state pension.”

“On a less positive note, 5% of today’s over 50s might have to work and save for between six and ten years after State Pension Age and a further 45% would have to work and save for eleven years or more beyond their State Pension Age to replicate their working life living standards in retirement.”

“This demonstrates that many people need to start saving more today, if they want to avoid having to work much longer than they planned and want to have an adequate retirement income in the future.”

New research published by the Institute of Directors (IoD), in association with Lucida, has revealed that the many people are choosing to save for their retirement with ISAs rather than pensions.

The trend is illustrated by the fact that the amounts paid into ISAs increases sizeably year on year, rising from £35.7 billion in 2007, to £43.9 billion in 2009/10, while employee and individual pension contributions peaked in 2007 at £25.6 billion, and fell to £22.9 billion by 2009.

This trend seems set to continue or even accelerate, with payments into ISAs jumping by almost £10 billion to a total of £53.8 billion in 2010/11.

The report, “Roadmap for Retirement Reform”, written by IoD pensions expert Malcolm Small, explores the scale of the challenge posed by an ageing population, a society habitually dependent on debt, low savings rates and high numbers of people with little or no pension provision. The key proposals put forward to address this situation include:

• Raising the state retirement age to 70 sooner than is currently planned – by raising the age to 68 in 2032, 69 in 2038 and 70 in 2044. The Government currently plans to raise the retirement age to 68 in 2046.
• Providing a single, flat-rate, universal, basic state pension, abolishing means-tested retirement income benefits such as Pension Credit.
• Radically reforming and simplifying the pension architecture, which has become hugely complex, unattractive and enmeshed in a forest of regulation.
• Developing a formal UK Government savings policy – the Government currently has no over-arching policy to encourage savings, despite the stark lessons in recent years on the danger of over-indebtedness

One in six people planning to retire this year will depend on the State Pension to fund their retirement as they have no other pension, new research from Prudential shows.

The figures come from Prudential’s Class of 2012 research, which provides insights into the financial expectations of Britons planning to retire this year.

Women are more than twice as likely as men to have no pension – 20% of women retiring in 2012 will depend on the State Pension compared with just 8% of men.

The average person planning to retire this year will look to the State for 34% of their income, with State Pension payments rising to £107.45 a week for single people. Company pensions (35%) are the second highest source of income, and the remaining 30% comes from a mixture of savings, investments, personal pension savings, part time work and money from family members.

The Prudential research also shows that one quarter of people retiring this year either overestimate by more than £500 a year what the State Pension pays, or simply do not know.

Regionally, people retiring this year in the Midlands are the most likely in the UK to rely on the State Pension (40%). This compares with a quarter (28%) of those in Scotland, who claim that they will be the least reliant on the state for their retirement income.

A new report has revealed that the UK’s ‘Retirement Nation’, which includes all retired people, saves the state and society at least £25 billion a year through unpaid care, community and voluntary work.

However, the report, ‘Our Retirement Nation’, which was commissioned by MGM Advantage, warns that the contribution made by this part of society is not fully recognised and that the government and society as a whole need to do more to understand their emotional, health and financial requirements.

MGM Advantage is calling for fundamental changes to ensure that the Retirement Nation gets the respect and support it deserves from society, the media, the financial services industry and the government. Its recommendations and key findings are:

• Respect – A change in attitude towards the Retirement Nation and greater recognition for retired people and what they contribute to the UK – only 14% of retired people feel valued by society.
• Representation – The Retirement Nation is a big part of the UK society for what they contribute (£25 billion through unpaid care, community and voluntary work), but also the help and support they need. The Retirement Nation needs a voice. MGM Advantage recommends the Government creates a Minister for Retirement.
• Education – More done to help people maximise and make the best use of their financial wealth in retirement. The first step is to help people improve their basic knowledge about retirement and finance – 31% of retired over 55s have not heard of the Open Market Option.
• Simple products – Financial services and government need to continue to work together to innovate and design new retirement products that meet the needs of the Retirement Nation and are easy to understand, accessible, and offer good value – only 29% of over 55s know exactly what an annuity is.
• Ownership – People need to take ownership of their retirement planning – from building up a pension pot in their 20s and 30s to making the best retirement income decision when they retire – 54% of non-retired UK adults are not at all prepared for retirement.

A new report from LV= has revealed that retirees in the UK have experienced a 33% increase in living costs since the year 2000.

Research reveals the total expenditure of the UK’s 10.6 million retirees equals £96 billion a year – this means on average a retired couple spends £17,922 a year and a single retiree spends £9,917 a year – or £190.70 a week. With the average pensioner in the UK receiving state pension income of £102.15 a week, retirees are spending up to £88.55 a week (or 87%) more than the average state pension.

The biggest dent to a pensioner’s overall wallet is from food and non-alcoholic drinks, costing £1,411 annually and equating to 14% of their annual spend. The second biggest emphasis of spending is on recreation and culture – single pensioners are spending an average of £1,337 a year.

Pensioners are burning up a tenth (9%) of their annual spend on utilities such as fuel, water supply and electricity – they now spend £918 a year, compared with £635 in 2000. Furthermore, although senior citizens receive discounted travel, the cost of transport and motoring costs (including petrol and vehicle maintenance) add up to an average annual bill of £1,217.

The cost of living has increased significantly since 2000. The biggest percentage rise on the cost of goods for pensioners has been on alcoholic drinks and tobacco which has increased by 57%. Food and non-alcoholic drinks comes second with a 45% hike.

Matt Trott, LV= Head of Annuities said: “Being a retiree in the UK doesn’t come cheap and people approaching retirement need to look at their retirement income options early, to ensure they get the most out of their savings to maintain a good quality of life in retirement.”

More than 10% of people who had planned to retire during 2012 are making alternative arrangements and putting off drawing their pension for the time being, according to the latest results from Prudential’s Class of 2012 research.

Of those deferring their retirement, a third claim they do not want to retire yet, while two thirds say they are putting it off because they can’t afford to retire as originally planned.

However, showing that giving up work before growing too old is still an aspiration for many, the average age of people planning to retire this year is 60 years old – a similar age to last year’s survey and seven months younger than in 2010.

Vince Smith-Hughes, Prudential’s retirement income expert, said: “One thing this year’s retirees have in common is actively making choices about when and how they will retire. Although many people think the idea of retiring as early as 60 is out-dated, the majority of this year’s retirees are defiantly sticking to that plan. It’s likely that many of these people will have accumulated benefits in final salary pension schemes that generate an acceptable income in retirement – perhaps signalling that the golden era of retirement for baby boomers isn’t over yet.

“It is, however, undeniable that there is a new retirement reality for a significant number of retirees. People are living longer, and for many, the very real prospect of a thirty year retirement is either unpalatable or unaffordable, hence the decision by many to continue to work. Retirement is also becoming a more opaque concept, with many people working part-time, either out of necessity or desire.

“To stand the best chance of having a comfortable retirement, which starts when you want it to, it’s important to seek professional financial advice on saving for a pension and on what post-work income options are available. Saving as much as you can as early as you can will help you to gain more control over your retirement."

New statistics published by the Office for National Statistics reveal that that people are working longer than they used to. The average age at which people leave the labour market – a proxy for average age of retirement – rose from 63.8 years to 64.6 years for men and from 61.2 years to 62.3 years for women between 2004 and 2010.

This average summarises information about the ages at which people stop working, which differ for different people. For men, the peak ages for leaving the labour market are 64 to 66 years. For women, the peak ages are 59 to 62 years. Thus, retirement peaks around State Pension Age (SPA) for both sexes; but many people retire before SPA, and others work beyond SPA.

In 2010, there were 3.2 people of working age supporting each person of SPA and over in the UK. Without any changes to SPA, this ‘old age support ratio’ would drop to 2.0 by 2051, but under current legislation SPA has already begun to increase for women, and SPA for both sexes will rise to 68 by 2046. When these SPA changes are taken into account, the old age support ratio is projected to fall less, to 2.9 by 2051.

Women’s life expectancy at SPA will decline over this decade as their SPA rises. Between 2021 and 2051 life expectancy at SPA is expected to rise gradually for both sexes, because, following a change in the assumptions for future life expectancy in ONS's 2010-based population projections, life expectancy at the relevant ages is now projected to increase at a slightly faster rate than the increases in SPA contained in the Pensions Acts 2007 and 2011.

There are inequalities in life expectancy between social classes. The latest estimates for England and Wales show a gap of over three years in life expectancy at age 65 between the highest and lowest classes in the National Statistics Socio-economic Classification (NS-SEC). Within the UK, life expectancy at age 65 is highest in England and lowest in Scotland.

Nearly one in five of those planning to retire this year will do so with outstanding debts, according to new figures released by Prudential. The Class of 2012 research looks at the finances and expectations of those planning to retire this year, and found that the average amount owed by debtor retirees is £38,200.

The proportion of people retiring in debt this year (18%) has fallen slightly from 20% in 2011. However, the average amount owed has increased by more than £5,000 from last year’s figure of £33,100 per person retiring with debts.

Outstanding mortgages and credit card bills make up the bulk of the Class of 2012’s debt. Half of those with debts owe money on their home loan and more than half (51%) are struggling with outstanding credit card bills.

The results of the survey also give an insight into the effects of outstanding debt on the finances of a new retiree. On average, those planning to retire this year with debts will be making monthly repayments of £260, which equate to a fifth of their expected £1,290 a month income.

Paying off debt could take this year’s retirees an average of nearly four years and 8% of those who will still owe money when they retire in 2012 say that they will never be able to pay it off. One in four say that they will be making repayments of £500 or more a month.

Men retiring in debt this year are likely to owe substantially more than women, with average debts of £45,300 compared with £29,400 for women. Around 20% of men expect to have debts when they retire compared with 16% of women.

A generation of 'Wearies' – Working, Entrepreneurial and Active Retirees – could be forced to continue working into their seventies and beyond due to hardships caused by the looming pensions crisis.

Effectively ruled out of employment by age, they will set up their own businesses, according to the study for Friends Life by think tank Future Foundation. Many of tomorrow's OAPs will look to supplement their retirement savings by becoming self-employed in their later years.

Many are likely to supplement their income buying and selling goods on websites like eBay, while others will turn their front rooms into offices or cottage industry workshops or a nursery. Those with manual skills might set up gardening or home help businesses to make money helping neighbours, academics predicted.

Martin Palmer, head of corporate benefits marketing at Friends Life, said:

"We're expecting the traditional image of the pensioner with slippers and rocking chair to change completely.

"Many will not have saved adequately for a secure retirement and, with years of fiscal austerity taking their toll, by 2020 many people in their seventies simply will not be able to afford to give up working.

"Necessity is the mother of invention and Wearies will be among the most innovative and entrepreneurial contributors to the UK economy, despite their senior years."

People from across Britain were asked about their attitude to working in retirement as part of the study, entitled "Pensions: Crisis and Reforms".

Over half (51%) of those who are already retired said they would be prepared to do part-time work to boost their pensions. But the figure rises to three-quarters (75%) among those who are yet to retire.

According to the International Longevity Centre-UK (ILC-UK), it is too often assumed that retirement is a one-off event, rather than a process. Yet there is increasing evidence that we are moving towards a process of ‘gradual retirement’, a concept associated with a wide range of opportunities that may be available to older workers, including downshifting within their current employment, moving into new forms of flexible and part-time work, and self-employment.

On the one year anniversary of the Silver RPI, published by Age UK Enterprises, latest findings show that over 55s have seen an 18% rise in living costs since 2008 – almost 5% more than the general population. This means that someone aged 55 or over is now, on average, £978 a year worse off than official measures recognise. This increases to over £1,100 in additional annual costs for those aged 65-69.

New, recently published research suggests that the UK could be heading towards a perfect retirement storm.

One in three people (31%) accepted a new job with no idea about whether it came with a pension, meaning they ignored a benefit that’s typically worth thousands of pounds a year, the National Association of Pension Funds (NAPF) has warned.

A third of over-50s (31%, two million people) look set to use the equity in their home to help supplement their retirement income in the future, up from 1.5 million people in 2010 - dubbing them the HIPpies generation ('Home is Pension').

The UK’s over-55s have seen incomes fall, savings drop and debts rise as they struggle to meet the rising cost of living, reveals Aviva’s latest Real Retirement Report. This report - which is the seventh in the series – highlights the financial challenges that the three ages of retirement (55-54; 65-74 and over-75) face.

The Department for Work and Pensions has published research exploring how people feel about their standard of living and income in retirement and their feelings about their financial future.

The findings of the latest Saga Quarterly Report reveal a sharp fall in standard of living for older generations. For the third quarter in a row, Saga's Quality of Life Index has fallen, as soaring price levels continue to erode living standards.