Age UK calls for financial MOTs

Regular financial check-ups for the retired and people approaching pension age are critical to help the growing number of people aged 60 and over navigate later life.

Age UK's Financial Resilience in Later Life report, published on Wednesday, shows that ill-health, divorce, care needs and the death of a partner can derail financial plans overnight.

These factors are especially harmful when combined with retirement, which now routinely lasts 30 or 40 years for a growing number of people.

The report is calling for a new approach to financial planning that concentrates on building resilience rather than developing a single ‘plan' for retirement.

Age UK believes periodic financial MOTs and guidance in the lead up to retirement and in retirement are essential to ensure people are more financially resilient and better able to weather what life throws at them.

These ‘road-checks' are particularly important for those with modest savings, many of whom will not have used traditional financial advice.

Latest figures show that two thirds of people in the UK do not take professional financial advice - marginally down on figures for 2012.

Financial Services Commission

The report is the culmination of Age UK's Financial Services Commission, a series of 3 summits involving industry leaders, Government, consumer advocates and older people.

Inspired by Lord Filkin's warning last year that Government and society are ‘woefully unprepared for the UK's ageing population', the Commission's objective was to devise ways to help people manage and prepare for retirement now that they are living longer than ever.

Tom Wright, Age UK Group Chief Executive and Co-chair of the Financial Services Commission, said: ‘With retirement now often lasting 30 or 40 years - a third of your life - we're in critical need of a radical new approach to making later life financially secure and comfortable.

‘The concept of making one set of retirement plans at pension age is not fit for purpose.

‘We believe a series of financial MOTs at significant points throughout retirement, together with a robust state and private pensions system, is the real way to help people make ends meet and live comfortably.

‘We hope the financial services industry, regulators and Government who worked with us during the Commission will now act on the blueprint we've laid out as a result of our discussions so that people in Britain can feel financially prepared for and confident about their later lives.'

Low readiness for ageing

Research shows that there is widespread concern about finances in later life. Age UK research reveals that almost 2m people in England (20%) aged between 50 and 64 - the so called ‘baby boomers' (people born between 1946 and 1964) show very low readiness for ageing in terms of financial resources and health.

While the introduction of automatic enrolment into a workplace pension has been a vitally important step forward, the current generation coming up to retirement will not fully benefit.

One fifth of men and two fifths of women have no private pension at all, and half of all women have a private pension worth less than £22,000 - equivalent to just £1,300 a year.

Pensions Minister Steve Webb, said: ‘Helping people make better provision for their retirement is one of the most important long-term issues this Coalition Government has had to address.

‘Implementing policies such as automatic enrolment into workplace pensions, and legislating to introduce the fairer, simpler New State Pension from 2016 will make a massive difference to the prospects of future pensioners.

‘But the work doesn't stop here - and I welcome Age UK's role in spearheading the debate on what more we can do. The Pensions Bill which will be introduced into Parliament shortly will be a vehicle for the Government's ongoing pensions revolution, and I look forward to driving through Parliament a number of further measures which will reflect the realities of our ageing society.'

Financial Resilience in Later Life

The Financial Services Commission report sets out our roadmap for industry, Government and regulators to take to improve the financial resilience of our ageing society.

The report calls for more honesty and transparency in financial products, particularly around investment returns.

It also warns of the growing risk of scams following the Budget announcement that pensions will no longer have to be converted into annuities from April 2015.

Download Financial resilience in later life (PDF 980 KB).

Visit Financial Services Commission for more information about the Commission or to download the supporting pieces of research and provocations.

In this video, Tom Wright, Chief Executive of Age UK, explains why the commission was set up and what the report hopes to achieve.