A new report by Aviva and Age UK has found that only 48% of mid-retirees aged 65-75 who do not pay for financial advice are confident that their pension savings will last for life. The report, “Retirement Reality: Managing money in mid-retirement,” surveyed 1,000 mid-retirees and found that many are struggling to manage their finances in retirement. Nearly two-thirds (65%) of respondents believe that there is not enough support for people managing their financial needs as they age.
The report highlights the importance of having a sustainable income in retirement, with 83% of respondents saying that an income for life from their private pension savings has become more important to them as they get older. However, many are at risk of depleting their pension pots prematurely, with those withdrawing at a rate of more than 7% from age 75 facing a significant risk of running out of money.
The report recommends that innovative “flex first, fix later” retirement income solutions, which combine pension drawdown strategies with a later-life annuity, become the norm. These solutions have the potential to deliver better outcomes for people approaching the later part of their life and safeguard them against major difficulties that may lie ahead.
Aviva and Age UK are also advocating for the introduction of a mid-retirement MOT, which would offer pensioners guidance and support while they are in retirement. This could include a conversation about estate planning, fraud protection, access to state benefits, and managing finances if they start to experience cognitive decline.
The report’s findings are concerning, with many pensioners struggling to make their pension savings last. For example, a 75-year-old couple with a pension savings pot worth £100,000 who withdraw from it at a rate of 10% have a 75% chance that the money will run out while one of them is still alive.
Doug Brown, CEO of Insurance, Wealth & Retirement at Aviva, said: “Pensioners today clearly value financial security, but many seem to be sleepwalking into later retirement with a ‘set and forget’ approach to their retirement income. They are among the first retirees getting to grips with the complex decisions that come with pension freedoms and need more support to make choices that will work for the whole of their retirement years.”
Paul Farmer, Age UK’s CEO, added: “We frequently hear from struggling pensioners, many of whom have a small private pension of their own, about how tough they have found the last few years. Managing your pension and other finances becomes harder as you get older – especially where people have suffered a major life-change like a bereavement or a dementia diagnosis – and so it’s of vital importance that the industry, charities, Government and others can all work together to help people at this crucial point in their lives.”
Overall, the report highlights the need for greater support and guidance for pensioners in managing their finances in retirement. By introducing innovative solutions and providing regular financial reviews, we can help ensure that pensioners have a sustainable income and can enjoy a secure and fulfilling retirement.