10 min read

Cost of retirement so unaffordable for many, means workers over 65 set to treble

Posted in: Research

  • Working age adults predict they will need £500,000 to fund their retirement, however in reality workers aged over 55 estimate they have saved just over £80,000 on average[i]Full time workers above retirement age set to treble as one in ten (3.9 million[ii]) adults say they will have to continue to work full-time and never retire
  • [iii]One in five (8.6 million[iv]) adults of working age are planning to never fully retire
  • One in three (30%) adults of working age are currently not saving anything towards their retirement

People of working age across the UK expect to need £29,700 a year during their retirement, equalling over £500,000 for the average 17-year retirement, according to new findings from OneFamily. This would mean having £364,000[i] in savings when they leave work to add to the state pension provided by the government.

The reality is that for working adults closest to retirement, aged 55 and above, they have saved just over £80,000, falling far short of what they think they will need. If they were planning to retire at state pension age of 67, this would mean they would need to add £2,500[ii] to their savings on a monthly basis, an unrealistic figure for all but the very richest workers.

Although the youngest working age adults are those least likely to save, they are also the ones with the highest expectation with 18-34 year olds saying they will want £36,000 every year in retirement, and require savings of £470,000[iii] when they leave work.

Despite these great expectations, the research revealed that a significant number of working age adults are not saving anything for their retirement with nearly a third (30%) not putting anything away, despite the introduction of auto-enrolment pensions by the government, in an attempt to combat the problem of older people falling into poverty.

A fifth of all working age adults state they can’t afford to save (18%) and one in ten (10%) say they simply haven’t got round to it. The figures also show a significant number of workers uninterested in future planning, as over a quarter of those not saving (27%) say they want to spend what they have in the here and now, on socialising, or prioritise luxuries like holidays.

As a result of these differences in what people are able to save and what they will need, attitudes and expectations of later life are changing with over eight million adults of working age (22%) only having plans to retire on a part-time basis or not at all. One in ten say they will have to continue to work full time. The latest industry figures show that the UK now has over 1.2 million people aged 65 and over in full time employment[iv], compared to only 643,000 this time a decade ago[v]. This is equivalent to just 3% of the working population.

This reflects the views of UK adults with the clear majority (73%) of them believing they are less likely to retire now compared to older generations. This increases to three out of four amongst the younger generation, 18–34 year olds, (75%) demonstrating the perceived unaffordability of retirement for those early in their careers.

Simon Markey, CEO of OneFamily commented:

“Retirement is changing in many ways for the better. However, the costs associated are also rising and for many people of working age, saving for what they will expect to need in later life is not realistic given the other financial pressures they are under. For younger workers, this means many are simply disengaging and spending their entire disposable income on the here and now rather than saving towards their future goals.

“The adage of saving little and often is key here, as it will build up over the long term. Those approaching retirement also need to think about other ways of funding this period of life given the length of time we no longer work. We are increasingly seeing retirees using their property to fund their later years through a lifetime mortgage, which give homeowners the ability to access the cash in their property to fund an enjoyable retirement, whilst still living in the home.”

Read more about our Lifetime Mortgages here – www.onefamily.com/lifetime-mortgages

Notes:

[i] Average spend per year is £29,700. Average retirement lasts 17 years. £29,700 x 17 = £504,900. £80,000 is £80,000 based on adults that at least have a vague idea of what they have in retirement savings
[ii] 152 respondents of the 1,515 adults, have no plans to retire. 152 / 1,515 = 10%. 10% of 39,342,920 = 3,934,292
[iii] Currently 3% of the full time working population are above 65 according to the ONS Labour market report. OneFamily research shows one in ten adults of working age will never retire
[iv] OneFamily research shows that out of the 2,005 respondents, 1,515 are of working age. 1,515 / 2,005 = 76%. 76% of 51,767,000 (UK total population) = 39,342,920 (total number of UK adults of working age). 333 respondents of the 1,515 adults, only have plans to retire on a part time basis or not at all. 333 / 1,515 = 22%. 22% of 39,342,920 = 8,655,442
[i] £504,700 – State pension pay outs of £141,042 (£159.55 x 52 weeks x 17 years) = £363,658
[ii] £363,658 / 12 years / 12 months = £2525
[iii] £36,000 x 17 years = £612,000 minus state pension pay outs of £142,000
[iv] ONS – UK labour market: October 2017
[v] ONSEmployment, unemployment and economic inactivity by age group