PENSIONS is a hot topic these days. Whether it is youngsters not saving enough into one, or older people retiring without one, the subject is one that generates much public debate.
When you consider how much longer we are all living you can understand why – some of us could live for 30 years or more after retiring, meaning we are going to have to fund a period of time post-retirement that is almost as long as our entire working lives.
It is perhaps unsurprising, then, that research from insurance company SunLife has found that money is one of the biggest concerns among the over 50s.
Indeed, having questioned over 50,000 people in the 50-plus age group, the company found that more than a third (35 per cent) are worried that their cash will dry up before they die and a quarter said they did not think they had enough in their pension pot to cover their full retirement.
While the research found that many retired people are finding new ways of financing their post-work lifestyles, from renting out property or starting a business to selling things on eBay, or becoming a private tutor, research from Saga suggests that the older generation is also now becoming more comfortable with using debt.
The study revealed that people in their 50s are much more likely to consider borrowing money than those in their 70s and beyond, with one-in-five over-50s still in work saying that taking on credit helps them to live the type of life they want to lead.
Gloria Barker, head of loans at Saga Money, said: “The biggest surprise to us is that so many people, particularly in their 50s, have become so used to using credit that they now feel it is a part of modern life. It seems that the baby boomer generation has torn up the rule book again.
“Of course with some people working longer they are able to afford to borrow later into life than previous generations, but it seems that people also have a very sensible approach, preferring to use savings if they can, mostly borrowing for bigger expenses and trying to ensure they repay the credit over as short a term as possible.”
Although debt could help with cashflow in the short term, according to Royal London there is another trend among the older generation that could actually harm individuals’ longer-term financial position: cohabitation.
The financial services company said the proportion of people aged 65 and over who are cohabiting tripled in the period between 2002 and 2015, with many people who have previously been married choosing not to marry again following a divorce or widowhood.
However, Royal London personal finance specialist Helen Morrissey noted that with the tax and benefits system still dividing the world into either single people living alone of married people living together, cohabiting couples could be missing out.
“With each passing year more and more people are choosing to live together as couples and it is amongst those over pension age where the growth has been the most dramatic,” she said.
“But individuals need to be aware that there are many tax breaks and state pension advantages which apply only to married couples. For example, the family of a cohabiting couple could face an extra £70,000 inheritance tax bill compared with the heirs of a married couple. Similarly, cohabiting couples are excluded from income tax breaks worth hundreds of pounds a year and from the rights to inherit a state pension when one partner dies.”
For those who reached pension age before April 2016, for example, the death of a husband could result in the surviving wife’s state pension being boosted by around £2,500 each year. If the couple were not married there would be no additional payment.
Much has been made of whether the state pension should be protected by a double or triple lock in recent weeks, as well as if, how and when the state pension age should rise.
As most current and prospective pensioners will have complex financial and family arrangements perhaps the political parties should be taking a far wider view of how they can help people make the most of their retirement funding.
As Morrissey put it: “We also want the Government to review whether the tax and benefit system needs to be updated to reflect the world in which we now live, not the world of the 1940s.”
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