Article by Phil
What are the over 50’s most worried about according to local pension advisors
Well according to the latest survey by Sun Life and local pension advisors of their clients, the main concerns are as follows:
- #1 Cost of Living crisis 75% of people
- #2 Running out of money in retirement 40%
- #3 The value of their pension fund 30%
- #4 How the children and grandchildren are coping 29%
- #5 Paying for care costs 22%
- #6 Debt concerns 20%
All causes for concern, with pension performance and value a particularly big concern for women who worry about running out of money. As local pension advisors we already know that there is a significant gap between average pensions for men and women.
People are also worried about changes to their banking arrangements. As we’ve reported before, over 850 branches are due to close in 2022/23. This is a trend which has been going on for years now. As a result, over 8.5 million people have switched their arrangements from a branch-based account to an online account. This has happened as a result of compulsion, rather than by choice. But 28 million people still have branch-based accounts, but for how long. On average branch-based accounts have balances of just over £6,000. So, there’s still a huge amount of money in the banks branch networks.
The over 55’s are also concerned about their pensions. Research by Hargreaves Lansdown (FT Adviser 21/6/23) found that:
- 15% of retirees wouldn’t speak to anyone about their finances in retirement.
- Whilst 15% had no idea where to go for help.
- 27% would use the government’s Pension Wise service
- But 30% would consult family and friends
- And 30% already have a relationship with a financial advisor or they will seek advice before retirement
The Institute for Fiscal Studies (IFS) has also looked at retirement trends recently and they found that:
- Over 40% didn’t know how they were going to access their pension funds
- Of those who did know
- 20% said they were going to draw down “lumps” of cash as required
- 15% said they were going to buy an annuity
- 15% said they would go into drawdown and
- 8% said they didn’t intend to touch their pension
It’s not just over 50’s who are worried about their pensions. Aviva’s lest report “Planning for retirement in the 2050’s” looked at the concerns of under 40’s who would be potentially retiring in the 2050’s. The report found that:
- 2 million people are expected to have pension savings of around £250,000 at retirement.
- This figure is well below the current benchmark for average retirement living standards.
- 64% said they didn’t know what they needed to save in order to be able to retire.
- Over 50% said they didn’t know how to begin the process of saving.
- Only 20% said they thought they were prepared for retirement
- Only 10% had seen a local pension advisor.
- The average pension contribution rate was 8%.
Aviva recommend that the auto enrolment age is lowered to 19 and workers are encouraged to save 12.5% into their pensions.
People are also concerned about tax. In another example of the ever-increasing tax take has just come to light. The tax on early withdrawals from Lifetime ISA (LISA) account reached almost £50 million last year. LISA’s are long term savings vehicles where customers can benefit from a 25% uplift by the government if they save up to £4000 a year until they reach 60. If they withdraw money early, then there are penalties of 25% to pay back. Over 75,000 withdrew money from their LISA accounts last year with a value of almost £200 million which is what created the £50 million tax charge.
