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Retirement Planning: At/post Retirement - UK - January 2015

“Without the comfort of generous defined-benefit (DB) pensions, relatively few people will be able to enjoy the luxury of actively choosing to embark on a phased retirement. More likely is that phased retirement will most commonly be a result of people working to supplement their state pension, and attempting to leave their private pension relatively untouched.”
– Rich Shepherd, Financial Services Research Analyst

This report looks at the following issues:

  • Even older non-retirees are still putting off making retirement plans
  • Is phased retirement a mainstream option in the future?
  • Did retirees get all the advice they could have?

An ageing UK population, the 2014 Budget reforms to the pensions industry, subsequent changes to inheritance tax and the previously announced raising of the state pension age and abolition of the retirement age have all brought the issue of retirement into sharp focus. Increasing life expectancy will put a greater burden on the state to provide for the elderly, while individuals themselves are being urged to take more personal responsibility for their retirement.

All of these changes come at a time when the experience of retirement is itself in a state of change. The golden era of final-salary pensions is coming to an end, replaced by less valuable defined-contribution schemes. The traditional step into full retirement at 65 seems somewhat threatened by a more phased-in approach as people supplement pensions income by working longer, or use pensions as a way of affording an early semi-retirement by moving to part-time employment.

Retirement planning is, therefore, arguably more important for today’s retirees than it ever has been before. This report examines retirement planning, focusing especially on planning at and after retirement.

The report includes a discussion of the main issues surrounding retirement planning, and an application of Mintel Trends to the topic. The post-retirement consumer is looked at through the use of government and industry data. Finally, Mintel’s exclusive consumer research investigates pension product ownership, the phases of retirement and the income types currently received by over-45s. Also examined are the sources of financial advice used to plan retirement and expected income levels in retirement. Finally, Mintel’s research looks at the attitudes towards retirement and old age from both retired and non-retired points of view.

 

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • Retirement factors
            • Longer lives mean longer retirements…
              • Figure 1: Life expectancy at 65, by gender – UK, 1981-2062
            • …and increasing cost for the state
              • Figure 2: Projected expenditure on state pensions and related benefits, 2012/13-2062/63
            • Pensions reforms will change the face of retirement income
              • Figure 3: Volume of new annuities sales, 2009-13
            • The consumer
              • Defined-benefit schemes remain the most common private pensions
                • Figure 4: Ownership of pensions saving products, October 2014
              • One in 10 over-45s are in phased retirement
                • Figure 5: Lifestage, by type of income currently being received, October 2014
              • Half of over-45s are claiming a pension
                • Figure 6: Types of income currently being received, October 2014
              • Most over-45s will not get retirement planning advice
                • Figure 7: Sources of financial advice used for retirement planning, October 2014
              • Most expect income to fall in retirement, but three in 10 don’t know what income to expect
                • Figure 8: Expected gross annual household income in retirement, October 2014
              • A third expect less state support than previous generations
                • Figure 9: Non-retirees’ attitudes towards retirement, October 2014
              • Inheritance and long-term care costs are retirees’ biggest concerns
                • Figure 10: Retirees’ attitudes towards retirement, October 2014
              • What we think
              • Issues and Insights

                  • Even older non-retirees are still putting off making retirement plans
                    • The facts
                      • The implications
                        • Is phased retirement a mainstream option in the future?
                          • The facts
                            • The implications
                              • Did retirees get all the advice they could have?
                                • The facts
                                  • The implications
                                  • Trend Application

                                    • Advisers and insurers can prosper with flexible products for flexible retirees
                                      • Phased retirement needs employers’ assistance
                                        • How to make people care about their care
                                        • The Post-Retirement Consumer

                                          • Key points
                                            • Life expectancy projected to continue rising
                                              • Figure 11: Life expectancy at 65, by gender – UK, 1981-2062
                                            • Over-55s will account for a larger share of the population
                                              • Figure 12: UK population, by age, 2014-34 (based on 2012 projections)
                                            • The UK government plans to raise state pension spending
                                              • Figure 13: Projected expenditure on state pensions and related benefits, 2012/13-2062/63
                                            • People are working later in life
                                              • Figure 14: Average age of withdrawal from the labour market using the static indicator, by gender – UK,1984-2012
                                            • For many, longer life will mean living longer with illness
                                              • Figure 15: Period life expectancy, healthy life expectancy and disability-free life expectancy at 65, by gender, 2008
                                            • Individual pension business falls sharply, while workplace pensions rise
                                              • Figure 16: Total regular individual pension business and regular individual workplace pension business in force at year end, volume and value, 2009-13
                                            • The move away from DB to DC opens retirees up to greater financial risk
                                              • Figure 17: Occupational pension schemes in force, volume and value, 2004-13
                                            • Annuities market plunges following the 2014 Budget changes
                                              • Figure 18: Volume and value of new annuities sales, 2009-13
                                            • The number of drawdown policies continues to grow
                                              • Figure 19: Income drawdown in force, 2009-13
                                          • Pension Product Ownership

                                            • Key points
                                              • Four in 10 over-45s have a DB pension…
                                                • Figure 20: Ownership of pensions saving products, October 2014
                                              • …while just 11% have a DC pension
                                                • Pensions remain misunderstood by many
                                                  • Growth needed in pension ownership among lower socio-economic groups
                                                    • Figure 21: Ownership of pensions savings products, by socio-economic status, October 2014
                                                • The Phased Retirement

                                                  • Key points
                                                    • One in 10 over-45s are phasing in their retirement
                                                      • Figure 22: Lifestage, by type of income currently being received, October 2014
                                                      • Figure 23: Phased retirement motives matrix, October 2014
                                                    • The luxury of being able to choose your own retirement date
                                                      • Age is still a key determinant of working patterns
                                                        • Figure 24: Lifestage, by type of income currently being received, by age, October 2014
                                                      • Phased or delayed?
                                                      • Current Sources of Income

                                                        • Key points
                                                          • Half of over-45s are currently claiming a pension
                                                            • Figure 25: Types of income currently being received, October 2014
                                                          • A fifth of 65-74-year-olds are still working
                                                            • Figure 26: Percentage of consumers receiving income from employment, by age, October 2014
                                                          • Most have more than one type of income
                                                            • Figure 27: Repertoire analysis of types of income currently being received, October 2014
                                                          • Non-pensions savings could become more important income sources
                                                          • Sources of Financial Advice

                                                            • Key points
                                                              • Free guidance providers have made almost no impact
                                                                • Figure 28: Sources of financial advice used for retirement planning, October 2014
                                                              • A third use financial advisers…
                                                                • ...but more than half get no advice
                                                                  • Cost is the main barrier to adviser use
                                                                    • Figure 29: Use of/expected use of financial advisers^ for retirement planning, by gross annual household income, October 2014
                                                                  • Phased retirees are the most likely to get advice
                                                                    • Figure 30: Use of/expected use of financial advisers* for retirement planning, by lifestage, by type of income currently being received, October 2014
                                                                • Expected Retirement Income

                                                                  • Key points
                                                                    • Three in 10 over-45s do not know what income to expect in retirement
                                                                      • Figure 31: Expected gross annual household income in retirement, October 2014
                                                                    • Consumers expect their income to fall in retirement
                                                                      • Figure 32: Current gross household income, vs expected gross annual household income in retirement, October 2014
                                                                  • Non-Retirees’ Attitudes towards Retirement

                                                                    • Key points
                                                                      • Many are aware that state support for old age is waning
                                                                        • Figure 33: Non-retirees’ attitudes towards retirement, October 2014
                                                                      • People can be persuaded to use free guidance
                                                                        • 17% are relying on sale of assets to fund retirement…
                                                                          • …while only 12% are making plans for long-term care
                                                                            • Figure 34: Agreement with the statement “I’m already starting to plan for how I’d potentially pay for long-term care”, by type of pensions saving product held, October 2014
                                                                        • Retirees’ Attitudes towards Retirement

                                                                          • Key points
                                                                            • Leaving an inheritance is the biggest concern for retirees…
                                                                              • Figure 35: Retirees’ attitudes towards retirement, October 2014
                                                                            • …while 31% of retirees are worried about paying for their long-term care
                                                                              • A quarter feel let down by low savings rates
                                                                                • A tenth regret not planning more for their future
                                                                                  • Figure 36: Agreement with the statement “I regret not having done more to plan for my retirement”, by socio-economic status, October 2014

                                                                              Retirement Planning: At/post Retirement - UK - January 2015

                                                                              US $2,648.76 (Excl.Tax)