The Retirement Nation views retirement, on the whole, as a positive experience. The key things they want from their retirement are more freedom and more control over their lives.

Our research reveals that 80% of retired people said the best thing about retirement was having the time to do what they wanted (for example hobbies and holidays). However, it seems those still working but approaching retirement are less enthusiastic, with only 69% giving the same answer. Both groups agree not having to work so hard and having more control over their lives (63%) is also important. The importance of family and friends to the Retirement Nation is evident again with 40% saying one of the best things about retirement is having time to see more of children and/or grandchildren, and 40% saying it’s the opportunity to socialise with friends.

Pressures and anxieties

However, the Retirement Nation face pressures and anxieties. The graph shows the two biggest worries in retirement are failing health and lack of money. The hopes and fears of the Retirement Nation are two sides of the same coin; without money or good health they can’t do the things they want to, and so they lose the freedom and control over their lives that they crave.

Importantly, when asked what their biggest regret in life is at this point, the highest answer from those who were retired was not having enough money (for example savings) (21%). The median average people felt they needed to feel financially comfortable was an extra £98 a week. They would need an extra £83,800 in their pension pot to be able to secure this additional income in their retirement.

(A purchase price of £83,800 is needed to buy an annuity of £425 each month (£98 a week), based on a male, aged 65, non-smoker, level annuity, and five year guarantee, November 2011.)

Emotional pressures

To find out how retirees feel about retirement, we asked them a series of questions to probe their emotions, hopes and fears.

Their answers obviously show they are positive about retirement. Over a third (35%) said they have more time on their hands to do the things they enjoy. And when asked to sum up how they feel about retirement, 45% said they were either confident or content. However, from their responses, we can see they worry that a lack of money will harm their ability to have the full freedom to live the life they want.

A fifth (20%) of people are slightly nervous that their funds won’t cover their ambitions to fully enjoy the rest of their retirement. And when asked how they feel about retirement from an emotional point of view, the largest response, just under a third (32%), said it is a good time, but ‘there is still a gap between what I want to achieve and what I can afford’. And 27% admitted to feeling anxious about retirement.

So, they hope and desire that retirement will be a better time, but at the back of their minds is the niggling anxiety about how they are going to finance it over the longer term. This clearly shows how money adds an ‘emotional’ layer to views about retirement.

Health pressures

Failing health ranks as the biggest worry of the Retirement Nation, even ahead of money. It’s therefore positive, and probably understandable, that over half of those retired (53%) had undergone a personal health check in the last six months (compared to 36% of those still working and approaching retirement).

Those still working were on the whole healthier (maybe because they were younger), with over half (53%) having none of the medical conditions listed below. But amongst the retired, 45% said they had experienced high blood pressure and 38% had experienced high cholesterol (compared to 30% and 24% respectively of those still working).

A worrying 72% of people, almost three quarters of the survey, were unaware that certain medical conditions (including the two the majority of them had experienced – high blood pressure and high cholesterol) could entitle them to an enhanced annuity. This pays out a higher level of pension income than a standard annuity. It’s obvious the industry needs to take steps to make sure people are aware they need to take account of any medical conditions as part of the retirement process.

Long-term care

Given that the Retirement Nation worries about failing health, it was disturbing to find that they were poorly prepared on how they would finance any care or support they may need later in life. A worrying 21% did not know how they would fund any long-term care, and 28% believed they would have to rely solely on the State for support. So, almost half the people surveyed did not envisage having to use private wealth to pay for this type of care. This shows a concerning lack of knowledge – currently those with assets of over £23,250 receive no financial state support and need to fund their own care. And only 18% of the retired people in our survey claimed the net worth of all their personal assets was £25,000 or below.

But some did plan on using private wealth. Nearly one in five (19%) plan to use their children’s inheritance, 13% will sell their property, and a further 13% would release equity from their property. This shows a need for equity release schemes. Although the number of equity release customers are currently growing [SHIP October 2011], this area has great potential to help people fund their retirement, and more education is needed so people understand equity release and how it may benefit their retirement.

Only 3% would turn to their families for support, showing that many retirees find it unacceptable to rely on their families, even when in need.

Financial pressures

Lack of money (40%) is the second biggest worry for the Retirement Nation. Although, interestingly, those approaching retirement worry more about not having enough money (47% compared to 35% already in retirement). Maybe those already retired are resigned to making the most of the amount they have.

Of those retired, 37% say their standard of living is about the same as before they retired, but they need to manage their money. And encouragingly, nearly a fifth (19%) believe they are living better now they are retired.

However, over a quarter (26%) say they are worse off than before they retired, and 8% are struggling to keep the same standard of living and are slightly anxious about the future.

It appears most people are content to tread water during retirement. They have no grandiose schemes for a better or more extravagant lifestyle. Also, they are used to this level of lifestyle, and know with a little more effort they can maintain it. This approach could also explain why the Retirement Nation shows such a level of inertia when tackling financial decisions. Often, they can’t be bothered or are too scared to investigate financial matters further, even though it may make a substantial difference to their life.

“I’m going to spend the kids inheritance to pay for long term care”

This resolution to continue as before is shown by 22% saying they can afford to take as many holidays as they want and whenever they want – presumably some are limiting their ambitions. And as opposed to dining out, 41% mostly stay in, and visit family and friends whenever invited.

Inflation pressures

With the average length of time spent in retirement growing, inflation will have one of the biggest impacts on the Retirement Nation’s financial health. It is therefore worrying to see the extent to which the Retirement Nation has no knowledge of how damaging inflation can be, or what to do to limit this risk.

Nearly a fifth (19%) of non-retired people were not even aware of the negative impact of inflation, and well over half (54%) were not aware of any way to offset it. This is a worrying situation, as the level of CPI inflation stood at 5% in October 2011 [ONS November 2011], and RPI at 5.4%. This high rate of inflation means that collectively UK households need to find an extra £44 billion to maintain the standard of living enjoyed 12 months ago. For households where the main occupant is aged 65 -74, the corresponding figure is £3.5 billion, and where they are aged 75 and over, it is £2.74 billion. [MGM Advantage November 2011].

The rate of inflation for pensioners is even higher, due to the high proportion of their income spent on food and fuel, as illustrated in the following table.

However, steps can be taken to manage inflation risk. 28% of retired people said they will retain some exposure to stocks and shares, and new retirement income products are emerging which can help people offset inflation and make sure their income keeps pace with prices through retirement.

For Chapter 4 and more on the psychology of the Retirement Nation please read more here.

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

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