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We’re living longer but what does that mean for our finances?

16 January, 2019Peter Hahn and Brian Wilkinson

financial-challenges-for-the-over-50sWe’re all living longer – provisional data from Public Health England for 2017 indicates life expectancy at birth in England has now increased to 79.6 years for males and 83.2 years for females.

In 2017 the UK population reached a new high of 66m and that’s set to grow – up to 72.9m by 2041, according to the Office for National Statistics (ONS). As life expectancy increases so does the number of older people in our population – ONS data also tells us that one in every five people (18.2%) in 2017 were 65 or older and that’s projected to reach around one in every four people (24%) by 2037.

Good news?

So more of us will live longer and that means longer to enjoy retirement – which is good news, surely?

“It is good news,” says Dean of the London Institute of Banking & Finance and Professor of Banking Peter Hahn. “People forget that it wasn’t that long ago you retired from work and died shortly after. Today many people look forward to having a little bit more time in retirement to be able to spend with their families, travel and enjoy life.

“However, that has some challenges – first, how do you support yourself financially? Somebody who is 50 today has a life expectancy of around 80 – so that’s 30+ years. If you’re not going to work for all of that, do you have enough money?

“Second, all those extra years aren’t necessarily going to be healthy – how will you look after yourself?”

Healthy life expectancy is now 63.3 years for males and 63.9 years for females in England. So that’s potentially between 16 to 20 years living in poor health.

Have you saved enough?

What does this mean for our finances, and where can consumers go for advice?

“When we surveyed over 50s many said they hadn’t saved enough,” says Brian Wilkinson, Managing Director of Corporate & Professional Qualifications. “They told us they were planning to work until perhaps 7 years beyond their retirement age – that would take somebody with a retirement age of 66 to about 73. That would mean people trying to work, potentially, through ill health, or being incapacitated and not being able to work when they financially still need to.”

And, as we age, mental capacity tends to decline, meaning our ability to manage our finances also declines.

So what can be done?

“Well the first thing is to start saving as early as possible – auto enrolment into workplace pensions is helping to move the dial in terms of how many workers save into a pension, but individuals need to think about whether they’re saving enough,” says Brian.

As well as considering whether saving levels are sufficient, the key consideration has to be financial advice.

“When you think about the mix of assets owned by people these days, they’re more complex than ever before. A typical average household has housing wealth, pension pots, savings and investments.

“That mix of assets needs to be managed carefully to ensure consumers can release cash at a time when they are most likely to need it,” says Brian.

Temptation

“In later life people are faced with this enormously heady cocktail of temptation – being able to draw on housing equity and pension pots – but our research shows they aren’t considering the financial implications of deteriorating health and mental capability and any potential later life care requirements.

“We, and the financial advice community, need to keep educating consumers about the complexities they’ll face, particularly as they get older.”

Peter Hahn agrees: “Many people for a long time thought that in your 50s financial planning was ‘done and dusted’ – you’ve got your pension, paid off your mortgage. But that’s not the case anymore. Financial planning now starts at 50. It should have started a long time before... but at 50 we really need to start taking it seriously and face the fact that we’ll need more and more financial planning as we get older.”

How can advisers know that they’re doing the right thing for their clients?

"A lot of the advice burden will fall on advisers, so they have a vital role to play. They’ll often need to have what can be complex and difficult conversations, particularly as their clients age,” says Brian.

“We recommend they continue to invest in their qualifications so they can advise on financial plans for elderly customers – for example looking at qualifications in long term care and later life planning, pension transfer and equity release. With these qualifications they’ll have the skills and confidence they’ll need.”

For more, listen to our podcast on the challenges for the over 50s.

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Are you an adviser? Here are some relevant qualifications that you can invest in so you can advise on financial plans for elderly customers.


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