As I was eating my cornflakes a few weeks ago, I was struck by the newspaper headline 'People die younger in Glasgow's slums than in India'.
The article covered World Health Organisation research that found a boy born in the Glasgow suburb of Calton would expect to live on average until the age of 54 - 28 years less than a boy from the nearby affluent village of Lenzie. In India, the average life expectancy for a child born today is 62 years.
It is unusual to hear a 'bad news' story about longevity. Usually we hear about increasing lifespans. What really struck me when I delved below the headlines was there are wide variations in life expectancy throughout Britain, but overall, it's still increasing. It's important that if we want to help people combat the risk of longevity we understand their attitude to retirement, and their wants and needs. A few months ago AEGON conducted some research in this area. The results made interesting reading.
People are aware they will probably live for longer and so are taking a new approach to retirement. Over half of the survey said they intended to work beyond retirement in some capacity. Some no doubt are doing so because they are financially forced to. But some are choosing to do so, sometimes working part time, sometimes even taking up another career.
The baby boomer generation face new income challenges. In a way this is the 'lucky' generation; the one who has benefited from rising stockmarkets, increasing equity in houses, and generous defined benefit schemes. This is reflected in the fact 42% of them believe they will be better off than their parents. There's also a realisation that conditions may be more tricky for their children, with 32% believing they will be better off than the next generation.
But what unnerved me was how little in control people are of their retirement finances. A worrying 42% don't know what their future retirement income will be. A further 44% expect to receive less than £15,000 a year. Only 14% are looking forward to a more comfortable retirement with more than £15,000 income a year.
Interestingly, 33% are relying on their pension alone with no other savings or investments. While these figures wouldn't seem to indicate a comfortable retirement, 86% say they would at least 'get by' financially if they were to stop working at retirement. This is because people don't expect to have a mortgage or other outstanding debts at retirement.
People face many challenges, including that they haven't saved enough for retirement, and that they will live for 25 or even 35 years in retirement. The people we surveyed simply didn't view themselves as old. This underlines the fact that the idea of going to work on a Friday and by the Monday being sat in an armchair enjoying their dotage is irrelevant and out of date.
The strong message this sends out to the pensions industry is people need help adjusting to retirement. Retirement income solutions need to be designed to reflect these new challenges people face. The traditional annuity simply doesn't stand up to the plate. We need to allow people more flexibility over their income with the ability to stop and start at will to suit their income needs, but at the same time giving them the security through guarantees people crave.
In a way the worry for a lot of people is not that they will die at 54 years, but that they will die at 100 years old. We need to help them insure against this risk.
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