Income flexibility a requirement as majority of retirees anticipate one off expenses

New research from Aegon UK reveals that over half (56%) of people aged over 55 have either experienced or expect to experience a lump sum expense during their retirement years. However, as they near retirement, just 6% of 55-65 year olds are ready for the retirement they hope for, suggesting 94% will struggle to meet these costs. 

Topping the list of expenses those aged over 55 expect to fund with their lump sum is the cost of home renovations (26%), closely followed by paying for an expensive holiday (22%) and large contributions to family events (14%) such as weddings or the birth of a grandchild.

Just a tenth (12%) of people aged over 55 have accounted for accessing a lump sum to fund the cost of long term care. In the UK two fifths of over 65s have a longstanding illness and the average cost of care, excluding nursing care, is £29,000 a year.

The overwhelming benefit of the pension freedoms is that retirees have far more options over how and when they access their savings in retirement. 61% of retirees believe a regular guaranteed income is a priority for managing their retirement finances while 32% also want the ability to access their savings for unforeseen expenses.

Duncan Jarrett, Managing Director for Retail at Aegon said: “Well over half of people expect to face a lump sum expense in retirement, but just a third view income flexibility as a retirement priority. It’s understandable why a clear majority [61%] are focused on a regular income, but there’s a discrepancy between the one off costs people say they have experienced or anticipate versus the way in which they are structuring their retirement income.

“For people opting for a fixed income in retirement, lump sum expenses will have to be managed carefully so that they can meet all their expected obligations without damaging their quality of life. With life expectancy of today’s future retirees ever increasing, consumers need to pay special attention to their expenses and ensure they have a degree of flexibility should something unexpected emerge.”