17th September 2015
More than half of people, at 56%, aged 55 and over have already had to make a considerable lump sum payment or expect to do so during their retirement years, new research shows.
The survey conducted by insurer Aegon, also found that as people near finishing work for good, just 6% of are ready for the retirement they want, suggesting 94% will struggle to meet these costs.
Just over a quarter, at 26%, of those surveyed said their main expense is likely to be home renovations, while 22% said paying for an expensive holiday was likely to hit their wallet. Another 14% highlighted that large contributions to family events, such as weddings or the birth of a grandchild, were likely to make a significant dent in their finances.
However just 12% have accounted for accessing a lump sum to fund the cost of long term care. In the UK two fifths of over 65s have a longstanding illness and the average cost of care, excluding nursing care, is £29,000 a year according to Aegon.
The overwhelming benefit of the pension freedoms is that retirees have far more options over how and when they access their savings in retirement. The study found that 61% of retirees believe a regular guaranteed income is a priority for managing their retirement finances, while 32% also want the ability to access their savings for unforeseen expenses.
Duncan Jarrett, managing director for retail at Aegon said: “Well over half of people expect to face a lump sum expense in retirement, but just a third view income flexibility as a retirement priority. It’s understandable why a clear majority [61%] are focused on a regular income, but there’s a discrepancy between the one off costs people say they have experienced or anticipate versus the way in which they are structuring their retirement income.
“For people opting for a fixed income in retirement, lump sum expenses will have to be managed carefully so that they can meet all their expected obligations without damaging their quality of life. With life expectancy of today’s future retirees ever increasing, consumers need to pay special attention to their expenses and ensure they have a degree of flexibility should something unexpected emerge.”