Over-50s failing to plan for financial shocks in retirement

The perception that older generations are more prepared for retirement is being challenged by new research from Barnett Waddingham. The findings highlight that UK pension savers over the age of 50 are significantly underprepared for unexpected financial shocks, including ill-health, relationship changes, and urgent family financial support during retirement.

Only a fifth of all savers in the UK (19%) have fully considered getting a serious illness in their retirement plan, Yet surprisingly, it's the under-50s driving this; 25% have prepared, versus just 16% of over-50s. 43% of this older age group have "thought about it" but not included it in their retirement planning, and almost a third (32%) have not considered it at all. 

"Poor planning is almost as bad as not saving. Both risk retirees being left high and dry later in life."

Similarly, just 17% of all respondents have considered the possibility of having to go into care and reflected that in their retirement plan – made up of 14% of over-50s, and 22% of under-50s. 39% of over-50s have thought about it but not included it in their planning, while 35% haven’t considered it at all. Yet with around 300,000 over-65s living in care homes in England and Wales, at a average cost of about £60k a year, it’s an important facet of planning for later life.

Marriage and relationships 

Most people who are married or in civil partnerships have also not adequately planned for changes to their marital status. Just 18% of married people have fully planned for the possibility of becoming widowed, while 40% have considered it but not planned for it, and 31% have not considered it at all. 

For anyone in a relationship, a mere one in 10 (10%) have financial plans for getting divorced or breaking up – falling to 7% of over-50s, compared to 16% of their younger counterparts. 22% of these older workers have thought about it but not considered it, 37% haven’t considered it, and 39% say it wouldn’t be possible. 

Family planning 

And it’s not just romantic relationships which have the potential to impact retirement – families can have a dramatic impact on spending and saving plans. A fifth (21%) of parents have fully planned for their children needing urgent financial support during their retirement. This is once again driven by the under-50s at 30%, and is true of just 16% of parents over 50. 

In the other direction, 12% of British employees have planned for their parents needing urgent financial support while they’re retired – including a fifth (20%) of those under-50, and just 7% of over-50s. Of course, there are many over-50s who may no longer have parents; 52% of this age group said their parents needing urgent financial support wouldn’t be possible/ isn’t something they need to consider. However, 18% have thought about it but not included it in their plan, implying a possibility of need. 

Self-interested pension planning 

"The industry needs to urgently engage and educate people, especially those in their 50s and above. It’s not just about instilling in them the importance of planning, but about making sure they have the necessary tools to do so and a true understanding of the hurdles ahead and their familial financial ecosystem."

Some of this lack of shock mitigation could well be driven by an introspective approach to pension planning. Almost a third of British employees mostly think about themselves – their own personal income and spending – when planning for retirement. 36% mostly think about their relationship – the income and spending of them and their partner/spouse. And a quarter (25%) think about their wider family, including children. 

Older workers – the over-50s – are more likely to think about themselves first; 25% predominantly plan for themselves, versus 29% of under-50s. They’re more likely to think about their relationship (39% vs 32%), and much less likely to think about their wider family and children (20% vs 32%). 

Other key demographics come into play here. Parents are more likely to think about their wider family than non-parents, at 29% vs 18%, and women are more likely than men (28% compared to 22% of men). 

Ethnic minorities are almost twice as likely to plan with their wider families in mind than white people, at 38% compared to 23%. This is driven specifically by black employees, almost half of whom (46%) plan as a family. 

Mark Futcher, Head of DC at BW, said: “Poor planning is almost as bad as not saving. Both risk retirees being left high and dry later in life. The evidence shows we’re at risk of waving goodbye to a lost generation of retirees, cut adrift by insufficient planning, a myopic attitude to the harsh realities of financial shocks, and an unwillingness or inability to ask for help. There is time to avert this looming crisis … but there really is no time to lose.

“The industry needs to urgently engage and educate people, especially those in their 50s and above. It’s not just about instilling in them the importance of planning, but about making sure they have the necessary tools to do so and a true understanding of the hurdles ahead and their familial financial ecosystem. Pension providers are the most popular place for advice for over-50s, which means they have an urgent responsibility to offer fulsome, understandable, and targeted support.”

This research forms part of Barnett Waddingham’s latest report, The At Retirement Reckoning, which surveys over 5,000 UK employees and self-employed people, more than half of which are over-50, and reveals a concerning gap between retirement dreams and the reality. Employees are ambitious in their hopes for their retirement but this is shown to be mismatched with their financial readiness.