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Old vs young: who is more prepared for retirement?

Older people are increasingly unready for retirement but younger workers are finally pulling their heads out of the sand.

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by Michelle McGagh on Jul 31, 2013 at 09:00

Old vs young: who is more prepared for retirement?

You could be forgiven for believing young people are indifferent to saving for their old age, preferring to live for today but new research shows younger people are now more likely to save for their future. In fact, they could set some examples for those in the 55-plus age group who are unaware of how much they need to live on.

Over-55 crisis

Most over 55s expect to retire at 65 but the retirement readiness survey from pension provider Aegon UK shows 30% have no pension plan in place to help them achieve this.

To make matters worse one in three over 55s don’t know how much they need to live on in retirement and just 15% believe their pension is on track to meet their retirement income needs.

All of this adds up to a very grim retirement for people in this age group. Unfortunately, it is too late for them to take advantage of the government’s workplace savings push and they will have to take matters into their own hands.

‘The number of people taking on [savings] responsibility remains too low, with a lack of readiness among those nearest the end of the working lives clearly a cause for alarm,’ said Duncan Jarrett, managing director of retail and at retirement at Aegon UK.

‘There remains a considerable gap between expectations of retirement and the reality. The reality is too few people are planning ahead to achieve the financially comfortable retirement they want, or ever expect.’

What can you do?

Glynn Jones, divisional director of independent financial advice firm LEBC, said older people still have time to make up the shortfall.

‘There are depressing delusions among people of 45 plus – they do not know where they are [in terms of pension] and reluctant to understand where they are,’ said Jones.

He said the first task was to put together a ‘schedule of assets’ which includes any pension savings, other savings and details of what you will receive from the state pension.

‘Get in contact with the Department for Work and Pension and find out what your state pension will be and when you will get it,’ he said, adding that many people had no idea the state pension age has increased for many.

To find out what you will receive from the state in retirement, contact HMRC:

‘One you are clear where you are starting from then I do think you can make in-roads…in 10 years you can make a difference,’ said Jones.

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13 comments so far. Why not have your say?

Rob Walker

Jul 31, 2013 at 14:18

Plenty of fear, aggravated by the usual financial institutions but not very much constructive help around calculating what 'meeting retirement income needs' really means because most people don't do this part of the equasion. Often the state pension isn't mentioned when those helpful calculators tell us how much we need to save for a certain income. Then there is the cost of a home which is usually fully paid for by the time retirement comes. Neither is the cost of working - all those train fares, second cars etc. A sensible analysis with a bit of downsizing will reduce those 'retirement needs' significantly and still support a happy retirement for most people who are not too greedy.

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Rob Walker

Jul 31, 2013 at 16:35

ps. ...and as for that 'Retirement Smile' link on the right, well my mother lives in a nursing home paying out fees from her carefully planned savings in excess of £40k pa. The staff are good - plenty of smiles there - but I don't see the residents smiling, just sitting in a chair staring at Noel Edmond's cheezy face every afternoon and watching replicas of their own belongings on Antiques Roadshow. If they could end it all tomorrow the uncomfortable truth is that they probably would.

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Jul 31, 2013 at 22:21

The scaremongering pensions industry uses current rates of annuity to calculate frightening shortfalls in future pensions relative to needs/wants, but these rates are at conveniently historic lows for their purpose.

Several changes by governments - this one as well as the last one - of the terms governing pensions have encouraged many to plan to control their own assets for retirement outside the pensions industry, as they cannot trust either government or the institutions that manage pensions at rather high charges and poor performance.

Lastly, historically repressed rates of interest on savings discourage savings in cash and equivalent.

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Aug 01, 2013 at 09:04

Old versus young is too much of a generalisation.

Amongst the 55+ group, there is a big distinction between those with and those without final salary schemes. Some of those who had final salary schemes in the past lost them when private companies were subject to take over or merger and were replaced by a lump sum into a defined contribution scheme. This kind of thing cannot be foreseen. An enormous amount is down to luck.

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Aug 01, 2013 at 15:31

I agree - its great to have something in the pot ready but who knows the individuals life expectancy beyond 65 taking into account smoking/drinking/other bad habits and hereditary health issues.

Do not plan to go excessively wild in older age - you probably will not have the energy for it anyway.

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Aug 06, 2013 at 01:37

Many of the older generation sought to plan their retirement only to find out at a very late, and usually far too late, that because they live in a country like Canada or Australia or Thailand their State Retirement Pension is not index linked; they are frozen. The State Retirement Pension is paid at the level at which it first becomes payable in the host country - never to increase.

A full retirement pension on 1993 was £56.00 per week. Residents in the UK, the EEA and a few other countries like Macedonia, USA, and the Philippines receive the annual up-rate change - the current rate is £110.15 per week but the 1993 frozen pensioner is still only getting £56.00.

How can one plan against this discrimination by the government?

Discrimination that Minister Steve Webb proposes to continue under clause 20 of his Pension Reform Bill and the lack of justification for which was exposed by the disgraceful "ignorance" displayed by the panel of MP's comprising the Bill's Scrutiny Committee.

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Jane Davies

Aug 06, 2013 at 05:13

I thought discrimination was illegal. The new Commonwealth Charter states that commonwealth countries are implacably opposed to all forms of discrimination, I know that is not legally binding but how can Cameron stand by and watch the Queen sign this document with all the publicity surrounding it all the while going against the principle contained within it? We contributed to our pensions just the same as everyone else, we should all be treated equally.

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Aug 06, 2013 at 10:08

I am wondering which MPs were on the Bill's Scrutiny Committee. It certainly does seem to be discrimination, though some may argue a technical point. (I don't know of one.)

It seems to me that the decision makers are indeed ignorant. I remember Steve Webb commenting that anyone who was made redundant as they approached retirement age could "go on benefits". There are many people who because they have behaved responsibly in the past and who have also been lucky enough to be able to save in the past, are unlikely to qualify for benefits. In other words, they live on savings until they run out, move house then claim benefits. Okay, so that is why they saved - but they also pay the penalty for having been responsible in the fat years. This group is ignored by those who have no concept of individual responsibility, nor the reality of having to take risk as in defined contribution pensions, nor the vast amounts of pension savings required to buy even a £10k annual pension.

As with the residents of Canada, Australia etc, the lesson will only be learned by the decision makers when they are deeply affected by it on a personal level.

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Aug 06, 2013 at 10:39

dd - the guilty members were

Chairs - Martin Caton & Anne Main

Committee : Tom Blenkinsop, Karen Bradley, Oliver Clvile, Sheila Gilmour, Richard Graham, Andrew Griffiths, Michael McCann, Gregg McClymont, Pamela Nash, Christopher Pincher, Mark Reckless, Jonathon Reynolds, Andrew Selous, David Simpson, Steve Webb and Heather Wheeler.

The committee was no doubt weighted to favour the Coalition presenting the Bill...I'll leave you to identify the party affiliations!

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Aug 06, 2013 at 10:39

dd - that should read Oliver Colvile - and he was one of the worst offenders!

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Aug 06, 2013 at 11:07

Thanks, RobtheFox! I'll be looking them up! (Well, some, at least.)

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Jane Davies

Aug 06, 2013 at 16:30

I watched the video of the scrutiny committee and was horrified about the total ignorance and arrogance displayed by these people. We should all be very afraid that these idiots are determining the retirement plans of millions of people. The ignorance about the frozen 4% and total lack of knowing right from wrong and what the word discrimination means is mind blowing. Ministers should not be allowed to administer pension plans let alone thinking up new ones.

Empathy, morality , fairness and justice are clearly not on their radar.

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Aug 06, 2013 at 23:32

They will only change the rules when they want to retire to somewhere like Canada or Australia...

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