UK savers aged over 50 are less prepared for unexpected events in retirement compared to their younger counterparts, according to a new study by independent consultancy Barnett Waddingham.
The report, which surveyed 5,000 UK employees and self-employed people, more than half of which are over-50, found that employees’ financial readiness does not match their hopes for retirement.
Just 16 percent of over-50s have accounted for the possibility of serious illness in their retirement plans, compared to 25 percent of savers under 50. Meanwhile, 43 percent of older savers admit they have thought about health challenges but have not incorporated them into their planning, and 32 percent have not considered them at all.
Only 14 percent of over-50s have prepared for the potential need to enter care, compared to 22 percent of under-50s. Over a third (35 percent) of older savers have not considered care costs in their planning, despite the average annual cost of care homes in England and Wales reaching approximately £60,000.
Relationship and Marital Status Changes Overlooked
The report also reveals a lack of financial preparation for changes in marital status. Only 18 percent of married individuals have fully planned for the possibility of being widowed, with 40 percent considering it but failing to plan, and 31 percent not thinking about it at all.
When it comes to divorce or relationship breakdowns, just 7 percent of over-50s have accounted for this in their financial planning, compared to 16 percent of younger savers. Over a third (37%) of older workers have not considered the impact of divorce or separation on their finances.
Family dynamics can significantly affect retirement finances, yet only 16 percent of parents over 50 have planned for the possibility of their children needing urgent financial support during their retirement. In contrast, 30 percent of under-50s have made such provisions.
The trend is similar in planning for ageing parents requiring financial help. Just 7 percent of over-50s have included this in their retirement plans, compared to 20 percent of under-50s – although the fact many over the age of 50 no longer have living parents is likely a factor. Just over half (52%) of older respondents say they do not need to consider financial support for their parents.
Mark Futcher, Head of DC at Barnett Waddingham, said, “Poor planning is almost as bad as not saving. Both risk retirees being left high and dry later in life. The evidence shows we’re at risk of waving goodbye to a lost generation of retirees, cut adrift by insufficient planning, a myopic attitude to the harsh realities of financial shocks, and an unwillingness or inability to ask for help. There is time to avert this looming crisis … but there really is no time to lose.”
Self-Focused Approach to Pension Planning
Barnett Waddingham attributes some of these shortfalls to a self-focused approach to retirement planning. Among all British employees surveyed, nearly a third prioritise their own income and spending when preparing for retirement. Older savers are slightly more relationship-focused, with 39 percent considering the finances of themselves and their partner, compared to 32 percent of under-50s.
However, only 20 percent of over-50s consider the financial needs of their wider family and children in their plans, compared to 32 percent of younger savers. Demographics such as parenthood, gender, and ethnicity also influence planning priorities. Parents are more likely than non-parents to consider their wider family’s needs (29 percent vs 18 percent). Women are more likely than men to factor in family (28 percent vs 22 percent).
Ethnic minority employees, particularly black workers, are more likely to adopt a family-oriented approach, with 46 percent of black employees considering their wider family’s financial needs compared to 23 percent of white employees.
Futcher added, “The industry needs to urgently engage and educate people, especially those in their 50s and above. It’s not just about instilling in them the importance of planning, but about making sure they have the necessary tools to do so and a true understanding of the hurdles ahead and their familial financial ecosystem. Pension providers are the most popular place for advice for over-50s, which means they have an urgent responsibility to offer fulsome, understandable, and targeted support.”
