Rising utility costs and fear of recession key retirement concerns
People facing retirement are more concerned than ever about their financial security and income in retirement, according to a new research report from investment, pensions and insurance group LV=. The new LV= ‘State of Retirement' report reveals deep concerns among the nation's pre-retirement population about their overall financial situation and level of savings, and how their retirement years may be impacted.Rise of ‘Fred'
One of the key findings is the rise of ‘Fred' - 66% of the survey's respondents' say they are Facing Retirement Earnings Doubts, and in the last year have become increasingly worried about their financial security in retirement. This ‘anxious majority' equates to a staggering 6.5m people.
Utility bills and rising food costs are biggest worry
People facing retirement believe increasing utility bills and food prices will be the biggest threat to their financial security after they retire. Of those who are concerned about the future, more than three-quarters (77%) highlight these spiralling costs as their biggest financial concern. This equates to 5m people. With the cost of gas, electricity and water having risen by an average of 52% since 2003, and at least six electricity and gas suppliers increasing prices during the first four months of 2008 alone, this is seen as a very real threat to retirement income.
Income gap
The LV= ‘State of Retirement' report also reveals that people approaching retirement are aware that there is a significant gap between the income they will need to maintain their standard of living in retirement, and what they will actually have. Those surveyed said that on average they would need £20,100 a year in retirement, but believed they would actually have an income of only £16,900 a year.
Fear of recession and Credit Crunch
Four out of ten people facing retirement (42%) fear that a recession will affect their wealth when they retire. The next biggest concerns are rising interest rates (35%) and media reporting of the ‘Credit Crunch' (32%).
Not saving enough
Worryingly, around a quarter of those facing retirement (24%) are saving nothing at all towards their retirement, while four in ten (46%) haven't increased their savings despite having serious concerns about their own financial future.
Perhaps most surprisingly, one in six people facing retirement (16%) have actually decreased the level of provision they are making. And a similar number of people (14%) have decided to tackle the situation head on by increasing the amount they are saving long term to supplement their income. Those who are saving more are putting away on average an extra £190 each month, with the minimum amount reported to be just £8 extra each month.
Mike Rogers, Group Chief Executive of LV= said: "The combined impact of the rising cost of living, fears of a recession, and widespread media coverage of the Credit Crunch, has created an anxious majority of people facing retirement who are very concerned about their financial future.
"Despite the well-publicised £27bn savings gap, it is worrying that as many as a quarter of the people we surveyed are making no provision whatsoever towards their retirement. Moreover, a further 46% are failing to increase their savings despite fully expecting an income shortfall when they retire."
Family financial pressure
It isn't just the turbulent economic climate that is threatening people's retirement wealth - the LV= research shows that those facing retirement are increasingly being approached by other family members for financial help.
According to the LV= ‘State of Retirement' report, almost half of people facing retirement (47%) have been asked for financial help by a family member in the last year. Furthermore, a quarter of the people who have been approached by a family member (26%), say that this behaviour is unusual, evidencing a trend towards financial difficulties across the board, not just among those facing retirement.
Not seeking advice
More than half of the people surveyed (56%) say they have not yet taken any form of financial advice about retirement planning. This is compounded by the fact that almost three-quarters of people facing retirement (72%) are confused by the financial issues, seeing obstacles to financial planning such as pension rule changes (81%) and fast changing tax rules (70%).
Mike Rogers concludes: "Given that so many people are aware they will face financial difficulties in retirement, and that pensions products aren't simple, it is staggering that so few are seeking financial advice. This is obviously not helped by the survey's findings, that many people are confused by what they perceive to be ever changing tax rules.
"Our advice to anyone approaching retirement is to seek professional financial advice to ensure you make the most of your finances when you retire. And young people shouldn't ignore their own retirement needs, despite it being decades away. Saving just a little and often - as much as you can afford - is a step in the right direction."