The Retirement Nation – those approaching retirement or already in retirement – in the UK is the fastest growing sector of the population.

As it grows in numbers, it also grows in influence – by what it contributes to our society, what demands it makes on our society, and also in the way it shapes our society.It’s important therefore that we understand the Retirement Nation, and their hopes and fears about retirement.

A growing population

The number of people in the UK who are either retired or approaching retirement is substantial and growing. We are simply following the global trend which, because of increasing longevity and the growing number of surviving births, saw the world population hit 7 billion on 31 October 2011.

In 2010, the UK population was estimated to be 62 million, and of that 16% were over age 65, compared to 19% who were under 16 [ONS September 2011]. This is destined to increase over the next 25 years, with those over 65 set to become a greater proportion of the UK population. In 2011, 658,000 people reached age 65, an increase of 12,000 on the previous year, bringing the number of retired people to 11.8 million. In 2012, it’s expected 806,000 will reach 65, a further yearly increase of around 150,000 [DWP 2011]. The number reaching retirement is increasing at a fast rate, as the baby boomer generation grows older.

Influence

The baby boomer generation – those born between 1946 and 1964 – are the best educated, healthiest and fittest group of older people this country has ever seen. And they are exercising a growing influence on our society. They want to be more involved. For example, participation in the UK 2010 general election appeared to be highest amongst older voters, with 75% of people aged 55 or over saying they had voted, compared with only 44% of those aged 18-24 [Electoral Commission 2010].

Financial contribution

Retirees in the UK have built up some considerable wealth over their working life. Our survey shows their average claimed net worth is £243,900, which includes the value of property, savings and investments. This gives this group strong buying power. Although a sizeable proportion of this value will be tied up in property, the UK’s finances will benefit from the tax paid by retirees on the annuities, savings and investments they hold.

Also significant is the fact that few retired people have substantial debts. Our survey shows 57% of retired people say they have no debt at all, and the average debt amongst this group is £8,200. This contrasts sharply with those approaching retirement who have considerably more debt, an average of £22,500. It could be that a number of respondents intend to use cash lump sums from pensions and other investments to clear their debt, in an attempt to start their retired life with a ‘clean slate’, leaving them with only living expenses to find.

As well as its buying power and tax from investment income, the Retirement Nation makes a substantial ‘invisible’ financial contribution to society. We need to understand the economic value of this to truly appreciate the role this group plays.

Our research shows the UK’s Retirement Nation saves the State and society at least £25 billion a year [based on average child care costs and the minimum wage] through unpaid care, community, and voluntary work. The graph shows the average amount of hours retired people spend either caring for family, or undertaking voluntary or charitable work.

However, the role played by this major part of society is not fully recognised. As well as caring for family, volunteering and charity work, a sizeable number of retired people in the UK continue to work. The number of over-65s still in work has doubled in the past decade. Around 412,000 over 65s were in work in 2001, rising to 822,000 in June 2011 [ONS June 2011].

This decision to continue working could be through choice

• people enjoying their work and not ready to retire yet
• or, increasingly, it could be through necessity, where people feel they are financially unable to retire.

For many though it doesn’t feel like a short-stop approach – a third of people aged 65 or over do not know when they will retire [MGM Advantage July 2011] – showing they have no end game in sight.

Demands on society finances

But as well as contributing to society, the ‘baby boomer bulge’ will make substantial financial demands. The high number of people approaching retirement will apply serious pressure on public services, particularly as their health fades. People are living longer and can expect to need some sort of care or support at some point in their lives. However, people are generally becoming wealthier and their expectations of the quality of the care they want are rising.

Care costs today can be high and unpredictable. The risk at age 65 of needing residential care during their future lifetime is 1 in 5 for men and 1 in 3 for women. The mean expected future lifetime cost of care at age 65 is £25,000 for a man compared with £44,000 for a woman [Dilnot Commission July 2011]. This cost will have to be met from both the private finances of individuals as well as the public purse.

The Government currently spends £14.5 billion (2010/11) on adult social care in England, and just over half of this is on services for older people. The cost of adult social care is estimated to increase to £22.8 billion by 2025/26.

For Chapter 2 and an overview of the Retirement Nation please read more here.

For the complete Retirement Nation report please download Our Retirement Nation 2011 (1.9mb)

Go back to the Retirement Nation homepage here