Focus on Active phase of retirement puts Brits at risk of later life financial shortfall

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UK adults risk potential financial shortfall in later life as almost two thirds focus on initial, active phase of retirement

• Over half (52%) avoid thinking about being older in retirement
• Three-quarters (73%) have done little or no planning for their retirement finances
• A third (34%) prefer to live for today than plan for tomorrow
• However, planning can have a significant impact: planners expect retirement finances to last for 19 years vs. just 11 years for non-planners

Almost two thirds (62%) of UK adults admit they focus on the early, active stages when thinking about retirement, according to new insights¹ from Standard Life, part of Phoenix Group, the largest long-term savings and retirement business in the UK.

Over half (52%) confess they simply avoid thinking about being older in retirement when they might be less mobile or in poorer health. However, focussing on the earlier part of retirement, when people tend to be fit and healthy, could mean retirees face a financial shortfall in later life, with funds unable to meet all their needs.

The findings are contained in Standard Life’s study Bringing Retirement into focus which looks to understand the attitudes, hopes and behaviours of people as they manage their finances to and through retirement. The research was conducted among almost 5,000 consumers nation-wide across the UK.

Coming up short 
Those who are not yet retired think they will be able to support their lifestyle until the age of 84, while those already in retirement expect to support themselves until 81. However, the latest figures show that more than 600,00 people are aged 90 or over² highlighting the challenge that people may face in making their savings stretch.

Jenny Holt, Managing Director, Customer Savings & Investments at Standard Life, part of Phoenix Group, comments: “I think it’s natural that the vast majority of people focus on the early retirement years, when they tend to be active and healthy, and pay little or no attention to the later stages when they may be inactive or require care. It’s much easier to anticipate those happy moments in our lives, however, this could leave a financial hole in later life, especially as we are living for longer and the time we spend in retirement is subsequently increasing.

“As we move away from defined benefit to defined contribution pensions, underestimating or not thinking about finances for the full duration of retirement could have a detrimental impact. It’s therefore crucial that people feel informed and engage with their retirement finances so they can have a financial future that lasts the full length of retirement.”

The reality for older retirees is also underlined in the DWP’s ‘Pensioners’ Incomes Series: financial year 2020 to 2021³,  which found that pensioner households with a head under 75 year of age have higher average incomes than those where the head was 75 or over. 

The importance of a plan
Three-quarters (73%) say they have done little or no planning around the amount of money needed to live on in retirement, while nearly three in ten (28%) admitting they never review their long-term finances to check how things are progressing. A third (34%) also stated they preferred to live for today than plan for tomorrow.

However, Standard Life’s research shows that planning can have a significant impact, with those who have planned for the future expecting their funds to support them for 19 years, compared to just 11 years for those who have not done any planning.

Jenny Holt, Managing Director, Customer Savings & Investments at Standard Life, part of Phoenix Group, continues: “We don’t know when the inactive phase of retirement will kick in, and it can be a difficult thing to think about, but it’s essential that we do. Having a plan in place brings peace of mind and can improve quality of life, but it’s important to be realistic about the duration of retirement, from the active stages to the less active ones.

“We have been working with the Pensions and Lifetime Savings Association (PLSA) to incorporate its ‘Retirement Living Standards’ into our Retirement Income tool which shows people whether they are on track for a Comfortable, Moderate, Minimum income in retirement, which can potentially help address this question over how long people might expect their savings to last.” 
 

ENDS

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Notes to editors

1. Boxclever conducted research among 4,896 UK adults. The research is nationally representative of UK adult population in terms of age, gender, region, with 578 people falling into Generation Z.

Quantitative fieldwork was conducted between 16th and 23rd July 2021.

Qualitative fieldwork was conducted between 3rd and 11th August 2021.

Further data is available on request.

2. ONS, Estimates of the very old, including centenarians, UK: 2002 to 2020

3. Pensioners’ Incomes Series: financial year 2020 to 2021. https://www.gov.uk/government/statistics/pensioners-incomes-series-financial-year-2020-to-2021/pensioners-incomes-series-financial-year-2020-to-2021#overall-income-trends
 
About Standard Life 
Standard Life is a brand that has been trusted to look after peoples’ life savings for nearly 200 years 
Today it proudly serves millions of customers who come to Standard Life directly, through advisers and through their employers’ pension scheme.
Standard Life is part of the Phoenix Group, the largest long-term savings and retirement business in the UK. We’re proud to be building on nearly 200 years of Standard Life heritage together
Our products include a variety of Pensions, Bonds and Retirement options to suit people’s needs, helping our customers to invest and save for their future. We’re proud to offer a leading range of sustainable and responsible investment options. We also offer Defined Benefit solutions for occupational pension schemes, to help trustees and companies protect scheme member benefits.
We support our customers on their journey to and through retirement with comprehensive, easy-to-understand guidance so they can invest in the right way for their needs, and plan a future they feel confident about.
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