Changing face of retirement

A major investigation into the UK retirement landscape has revealed Britain’s best off retirees are those in their 80s who worked right up to standard state retirement age and are living off company pensions.

The study, by the UK's leading over 50s experts, SAGA, examined the means and expectations of the newly retired, older retirees plus people still working; the conclusion is that the newly retired and tomorrow’s retirees could learn a lot from those who have already stopped working, in order to achieve their dreams of an affluent and active retirement.

The findings come from the first in a series of studies from Saga that challenge the perceptions of who Britain’s retirees are, where they are living and moving to, what they are doing in retirement and how they are paying for it.

Standard age retirement and a company pension = recipe for happy retirement

The research revealed a prosperous and happy generation of retirees, with 70% of people no longer working able to afford to do most things they would want to. Retirees in their 80s are most likely to be able to afford everything that they wanted in retirement, and are also most likely to feel the experience has lived up to their expectations. Among this group, the average age of retirement was 60-65 suggesting that, unlike their younger counterparts, they did not opt for early retirement, a decision that clearly paid off and a lesson younger retirees should take heed of.

Less than one in five (18%) retirees in their 80s have not been able to afford most things through their retirement, compared to 30% of retired fifty somethings who, as their age suggests, took early retirement. Over three quarters (80%) of retirees in their 80s are better off or at least as well off in retirement as they expected, compared to just 15% of retirees in their 50s who are better off than they expected to be, and 49% who are as well off as they expected to be.

Pension provision naturally has a huge impact on people’s means during retirement and their ability to enjoy these years. Retirees relying on company plans are revealed to be wealthiest and most able to afford everything in retirement. Just 15% of company pensioners are not able to afford all that they need in retirement. Worst off are those on a state pension, where over a quarter of people (27%) admit to going short once they stopped working. Hand in hand with adequate means in retirement comes enjoyment, as company pensioners are also most likely to feel that retirement lives up to their expectations, with just 15% of them feeling short-changed by their retirement reality. However the majority of retirees have their major income from a state pension (66%) followed by a company pension (41%) and 16% draw income from a personal pension.

Changing pensions changing face of retirement

However pension provision for the newly retired and those still working is set to change the face of the typical prosperous retiree. The number of company pension schemes is in decline and those approaching retirement are split as to whether a company pension will suffice. Those approaching retirement, and intending to draw a company pension, are divided almost half and half as to whether they will be able to afford their retirement dreams with 49% thinking they will be able to afford everything and a very similar 43% feeling less optimistic.

Personal pensions are increasingly popular with the newly retired or those set to retire in the next five years. 22% of people who retired in the last five years and a quarter (25%) of people intending to retire in the next five years have a personal pension compared to just 15% of retirees who retired more than five years ago. Men are also a lot more likely to save into a personal pension, with a quarter of men opting for this plan compared to just 14% of women.

However experiences of those already retired suggests that people with a personal pension and a state pension are equally likely to find themselves worse off than they expected to be. A quarter of these retirees have unexpectedly found it a financial struggle in retirement.

Surprisingly, being your own boss is not the panacea many expect as it appears to be less likely to pay dividends in retirement. 31% of retirees who ran their own business reported the highest mean retirement age and still reported struggling financially as they were worse off than expected, in fact 37% say they cannot afford all the things they had wanted to do.

The experiences of the retirees who have not been able to afford retirement dream signals the need for tomorrow’s retirees to learn from their predecessors’ experiences. Just over a quarter (26%) of retired people have not had the means for all they desire since leaving employment. However of this struggling group, almost half (42%) believed they had saved enough. The future therefore for those facing retirement is potentially very worrying with more than half of adults (51%) still working unsure about whether they will have the ability to afford an active retirement. Saga is urging workers nearing retirement to be realistic about their finances and retirement age. Taking expert financial advice doesn’t just help people understand their projected retirement income, it can also help those nearing retirement, understand what can be done to maximise it.

Andrew Goodsell, Chief Executive, Saga Group Ltd commented; “The experiences of people already enjoying life without work should act as an example to those who want to ensure an active and affluent retirement. It is not too late for people nearing, or those who have recently stopped working to make a few sound choices to ensure they can live that ‘retirement dream’.”

Almost three quarters of people no longer working feel that retirement has lived up to their expectations. The main reason for enjoying retirement is having time to oneself (56%) and time to spend with family (39%). The third reason for retirement living up to expectations is time to develop hobbies (30%). However 23% of retirees feel that retirement has not lived up to expectations and the main reason for this being inability to afford things (38%), followed by feeling older now they are retired (19%).