Over-50s slash pension savings
In spite of mounting concerns about their retirement prospects, Britain's over-50s have reduced their retirement savings by almost £18bn over the last year.
The annual State of Retirement Report, now in its third year, from pensions, investments and insurance group LV=, reveals that one in five of those approaching retirement (21%) have decreased their retirement savings by an average of £324 a month, or £3,800 a year.
This is more than double the £137 average reduction in retirement savings made by 20% of over-50s last year, suggesting retirement savers are jeopardising their long-term financial security in order to deal with more immediate financial pressures.
Women approaching retirement appear to be feeling the pinch most, with nearly a quarter (23%) cutting their monthly retirement savings by an average of £372, or £4,464 a year. By comparison, one in five men approaching retirement (19%) have reduced their retirement savings by an average of £265 a month, or £3,180 a year.
And worryingly, despite some improvement in equity markets over the past year, fewer than one in 12 of Britain's non-retired over-50s (8%) have increased their pension savings over this period.
Banking on economic recovery
As the Coalition Government prepares Britain for a lengthy period of austerity, it is concerning that over a third of non-retired over-50s (37%) are pinning their hopes of a comfortable retirement on a "substantial economic recovery" in the UK. This reliance rises to nearly half of non-retired over-60s (46%), with 18% of this group admitting they are now entirely dependent upon economic recovery to secure the retirement lifestyle they had been expecting.
A huge 2.8m people aged over 50 (28%) say they will be forced to delay their retirement. Nearly one in five (18%) claim to be angry about this situation and a further 47% are understandably disappointed.
Ray Chinn, LV= head of pensions, said "Britain's over-50s have already seen their pension pots damaged by the economic crisis, and now many appear to be diverting still more money away from retirement saving to deal with immediate pressures. We urge those already close to retirement not to give up on saving at such a crucial time. These days there are far more financial options available as you reach retirement age, everything from drawing an income while your pension stays invested, to releasing equity from your home."
Fears for financial future caused by rise in everyday costs
Looking at those within five years of their planned retirement, the LV= study found that nearly two out of three (64%) are even more concerned about their financial future than they were a year ago. The main factors behind this growing anxiety are the rising cost of food and utilities (74%), the lower interest rates available on their savings (66%), and the effects of the ongoing economic downturn (63%).
In the dark on retirement income
Only four in ten of those approaching retirement (41%) have a ‘fair' or ‘good' idea of how much income they will have to live on when they retire, while a further 14% say they will be totally reliant on the State to support them financially. People's awareness of their likely future income has fallen substantially since last year, when 63% felt they had a grasp on how much they would have to live on in retirement.
Taking the family strain
Financial strains in the family are causing further headaches for those trying to plan their retirement finances. Over the last 12 months, 8.6 million (40%) of the nation's over-50s have been approached by their children for financial support, up from 36% in 2009 and 35% in 2008.
Doing without advice
Despite their concerns about financial security in retirement, only one in five over-50s (20%) have consulted an independent financial adviser (IFA) for retirement planning advice. Even for those who are within five years of their planned retirement age, this figure remains at just 20%.
And the number of over-50s going it alone with their retirement planning has increased 7% since the first LV= survey in 2008, with nearly two thirds (63%) saying this year that they have never sought financial advice about their retirement. Yet the appetite for independent professional guidance has risen, with one in three (32%) saying they would trust Independent Financial Advisers (IFAs) the most to help improve their finances in retirement, up 11% from last year.
With an increasing number of options to consider, such as consolidating pension pots, taking an enhanced or fixed-term annuity, and equity release, people could lose out considerably in retirement by not taking professional advice to ensure they make the right choices.
Ray Chinn continued: "Pension savers are feeling the pressure from all angles; paying bigger bills, supporting struggling children, nursing investment losses and seeing their savings squeezed. A little expert advice can go a long way to easing this pressure, helping anxious pension savers map out the most suitable route to a comfortable and well-earned retirement."