Seven in 10 older people confused about funding retirement

Article date: 10 September 2007

  • Norwich Union report highlights need for new retirement solutions
  • Nearly half of Britons approaching retirement would like to wind down their working patterns and have a more staggered approach to stopping work.
  • Less than half of people aged 50-66 know what their retirement income will be.
  • Six in 10 pre-retired and recently retired would like more information on financing retirement.

Britons approaching retirement are facing a leap into the unknown according to a new report from Norwich Union published today. 

The report, called Rethinking Retirement, calls on the industry and Government to do more to ensure that the needs of today's retirees are fully catered for. It finds that a new breed of retirees - the so-called active ageing - is in need of simplified advice, flexible working patterns and more diverse retirement products.

A new in-depth survey of more than 1,600 people aged 50-66* commissioned by Norwich Union backs up the findings. It found that seven in 10 find retirement finance confusing (72%) and the advice around it conflicting (68%). Four in 10 (42%) are concerned they won't have enough money to live comfortably, and less than half (48%) of pre-retirees have established what their retirement income will be.

And while 43% expect their state pension to be their main source of income, only one in four (26%) actually know what the maximum state pension is. Ironically retired people are more likely to overestimate the state pension than pre-retirees.

The research was commissioned to support Norwich Union's Rethinking Retirement report published today, which investigates 50 and 60-something attitudes to retirement and highlights the need to explore alternative funding solutions. 

Willie Mowatt, director of protection and post-retirement for Norwich Union, says: "Retirement planning is an issue which is only going to grow in importance, so it is vital that action is taken now before it is too late. While the vast majority of people are looking forward to retirement, our research shows that many have concerns about getting older and funding later life. These concerns can be met by simpler financial products, clearer advice and greater flexible working plans. But industry and Government must work together to seek solutions to these issues.

"The Rethinking Retirement report is design to flag up these concerns while they are in their infancy and help organisations to work together to develop cohesive solutions to help future generations."

Flexible working
The research also revealed a strong preference towards flexible working pre-retirement. Nearly half of those in work would like to change their working circumstances before retiring. The majority (24%) would like to go part time in their current roles, while 12% would like a less demanding job. One in 20 (5%) would like to be self-employed.

However in reality, only around one in six (15%) retired people had actually altered their working patterns before stopping completely.

Of those continuing to work beyond state pension age, nearly half (47%) did so because they enjoyed working, although 32% say they can't afford to stop.

Clearer information sooner
The research also suggested a need for more information at an earlier age. Six in 10 (60%) would like further information on financing retirement, particularly around pensions, although only a third of people (33%) looked into retirement finances before the age of 50.

Only around four in 10 (42%) pre-retired people had heard of the Government-run Pension Service and only one in 20 (5%) had been sent on a retirement planning course by their employer. Barriers to financial planning included anticipated changes to pension rules and uncertainty about the future.

Income and out-goings
Living conditions are a worry to a large proportion of older people with nearly half (44%) of pre-retirees expecting their standard of living to be lower in retirement.

The greatest concerns over affordability relate to: living into old age (22%) home maintenance (18%) and care (12%), although only 4% say they are worried about household bills.

Only around one in 10 (11%) feel that the state pension alone is sufficient to live on and more than two thirds (70%) expect it to gradually disappear. However, only 2% of people questioned saw the state pension as not at all important to their financial security in later life.

Willie Mowatt adds: "One of the most interesting findings from our research was that there already seems to be a generational shift towards other forms of retirement income rather than just the traditional pension pot. Pre-retired people seem to be more open to alternative incomes - such as equity release and ISAs - than people who are already retired - so it is quite likely that these will become more widespread in the future.

"With this in mind, it is vital that providers and opinion formers alike consider their retirement propositions now to offer more flexible solutions."

-ends-

Download the Rethinking Retirement report PDF (2.14Mb)

Further supporting statistics are available.

*The "At Retirement Monitor" carried out by Marketing Sciences in June 2007, interviewing 1641 British adults who were approaching or who had just passed state pension age (SPA). 841 were "pre-SPA" (aged 50-64 for males and 50-59 females) and 800 were "post-SPA" (aged 65-66 for males and 60-61 for females).

Press office contacts:                         
Sarah Horner 01904 452828 Out of hours 07800 691569
Louise Soulsby 01904 452617 Out of hours 07800 695226

Notes to editors:
Norwich Union is the UK's largest insurer. It is a leading provider of life, pensions and investment products and one of the largest financial adviser (FA) providers. FAs provide over 70% of the company's long-term savings business in the UK.

Norwich Union is the UK's largest general insurer with a market share of around 14%, with a focus on insurance for individuals and small businesses.

Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media

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