TODAY’S BLOG

50+ SLEEPWALKING TO RETIREMENT NIGHTMARE

A growing number of people are at risk of being unable to afford a decent standard of living after retirement, according to a new report released this month. The report, ‘What is an adequate retirement income?’ estimates a quarter of people approaching retirement, the equivalent to five million people, are at risk of missing out on the income they need.

The report by the Pensions Policy Institute, sponsored by the Centre for Ageing Better, warns millions of people between the age of 50 and the State Pension Age are running out of time to prepare financially for retirement. That’s about 11 million people.

  • Around 3 million will not receive a minimum income
  • Around 5 million will not receive a personally acceptable income
  • Around 10 million will not receive a comfortable income

As a reminder, someone turning 50 this year would have been born in 1971, the year that T-Rex had a summer hit single “Get It On”, Clive Dunn was number 1 with “Grandad” and Rod Stewart “Maggie May”. The year that Gary Barlow, Clare Balding, Amanda Holden, Charlie Brooker, Ewan McGregor and David Tennant were all born, I doubt any of these will have a pension problem, but the majority of those born before 1971 look set to do so. It was also the year that the great David Hockney (83 and still working) completed one of his most famous works “Mr & Mrs Clark and Percy” (below) You can see Hockney’s work “The Arrival of Spring, Normandy 2020” at the Royal Academy until 26 September 2021.

Hockney 1971 Mr & Mrs Clark & Percy

PAIN IS COMING FOR THE UNPREPARED

The research found a low state pension, increasing unemployment and the transition to workplace pension schemes reliant on employee contributions are all factors leading to this risk. It warns this is an immediate cause of concern for those currently in their 50s and 60s. Not only that, but generations to come also risk being pushed into poverty if action isn’t taken to address financial insecurity in retirement, the report warned. It found 90 percent of people of all ages with Defined Contribution pensions may be at risk of falling short on their expected retirement income.

Despite recent measures such as auto-enrolment having resulted in more people saving into their workplace pensions, savers aged over 50 spend less time in auto-enrolment schemes and consequently benefit less. Most pension contributions remain inadequate, and challenges for savers have been exacerbated by COVID-19. The report also highlighted that those aged over 50 had the highest redundancy rate during the pandemic and warns that this age group is more likely than younger groups to experience long-term unemployment.

Worryingly, increasing job losses and unemployment levels may result in the generation currently approaching retirement being pushed out of work and left with a pension that does not provide them a decent standard of living. The report calls for a new consensus on what adequacy means, urging the Government to build a consensus between employers, industry, unions and individual stakeholders on what an adequate income in retirement is. Furthermore, Ageing Better is calling on employers to match workplace pension contributions at a higher rate, as well as better support for groups at risk of financial insecurity.

Hopefully your financial plan demonstrates that you will have enough or you know what the future looks like and have a plan to do something about it. However, I do want to labour this point… many of your peers, friends and family are unlikely to be as well prepared as you. Whether its Mr & Mrs Clark or Smith, the vet bills for Percy will be fairly unwelcome in retirement. So please urge them to get some advice, send them this blog post in an email and tell them to get in touch with us. I know the pictures of you finally out and about enjoying normal life after lockdown are all good to share, but do your real friends a favour, share our details with them! We can help prepare them for the future, making the most of the remaining time.

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Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

WHAT WE’RE ALL ABOUT

If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

WHAT WE’RE ALL ABOUT

If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.

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