Outliving savings is becoming a top concern
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More than two-thirds of financial advisers surveyed by Aegon said their clients’ main concern is now outliving their savings, as the cost of maintaining a moderate living standard in retirement has shot up.
A recent update to the Pensions and Lifetime Savings Association's Retirement Living Standards has shown a significant increase in the cost of maintaining a moderate standard of living in retirement. The moderate lifestyle, in the middle between ‘minimum’ and ‘comfortable’, saw the highest percentage increase, in part because focus groups said it should include money to support family members. It stands at £31,300 for a single person and £43,100 for a couple living outside London.
Provider Aegon surveyed 200 financial advisers, of whom 71% said clients’ primary concern is the fear of outliving their savings, coming before aspirations for leisure and lifestyle changes.
Related worries about inflation and the cost-of-living were named by 64% of advisers, and half (49%) said clients worried about covering potential long-term care costs.
As people worry about costs in retirement, three-quarters (76%) of advisers still reported clients hope to maintain the same standard of living in retirement as before retirement, and 65% said their clients want to help children and grandchildren financially. Nearly half (45%) said clients have a desire to travel or move abroad.
The research raises questions about the adequacy of current savings behaviours, said pensions director Steven Cameron.
The absence of a government plan on funding long-term care contributes to savers’ worries, he noted: “It’s not surprising that worries over the cost of long-term care features as a top-three concern for retirement clients. These findings highlight how important it is for government to provide more certainty over social care funding, so advisers can help their clients to plan ahead.”
He added that as those approaching or already in their ‘Second 50’ bear more of their own financial risks than the previous generation, “personalised financial planning based on an understanding of clients’ hopes and fears is crucial for tailoring strategies that meet individual needs and provide peace of mind".
