NEWS:

Press Release

Embargoed Friday 24th November 2017 00.01

Older people spending more time in ill health as health inequalities increase


Older people are spending an increasing number of retirement years living in poor health, according to new research from the International Longevity Centre-UK (ILC-UK). Inequalities in life expectancy by local authority have been increasing whilst the growth in pensioner income has been stalling.

The new findings have been revealed in ILC-UK’s annual flagship “State of the Nation” Factpack (“When I’m 64”) which has been supported by FirstPort.

The Factpack also finds that whilst the age at which older people retire has been increasing, relatively few older people work beyond State Pension Age. Older workers contribute towards a considerable amount of the UK economy’s gig economy work. And the over 50s account for more than a quarter of all zero hours work.

“When I’m 64” finds that life for 64-year old’s today is very different than 45 years ago with today’s 64-year-olds more likely to be homeowner, have a degree – but also more likely to have a chronic illness than those in 1972.

Life expectancy growing – but so is poor health and inequalities

  • Between 2000 and 2014, the gap between life expectancy and healthy life expectancy at the age of 65 rose from 6.4 years to 8.1 years for men, and from 8.2 years to 9.6 years for women
  • Inequalities in at 65 life expectancy by local authority have been rising, particularly for women. These inequalities are strongly related to local differences in health and disability, education, skills and training and employment
  • The average healthy life expectancy for those at 65 in the ten-worst performing English local authorities is 7.4 years. By contrast, the ten best performing local authorities have an average healthy life expectancy that is almost twice as long at 13.6 years
  • Tower Hamlets is the worst performing local authority with only 6.5 years of healthy life expectancy at 65, while Richmond upon Thames is the best performing local authority with 14.5 additional years of good health expected

A growing army of older workers, but still a retirement cliff-edge

  • 3.7 million people aged 50+ work in health and social work, education and wholesale and retail representing between 27% and 35% of their respective sectors
  • But agriculture is most heavily reliant on older workers, with almost half of the workforce (47.5%) over the age of 50
  • In 2016, economic activity rates for men aged 65 to 69 were 25.5%, while among women they were16.9%
  • The proportion of people in the labour force between 65 and 69 who were self-employed was 35.1% in 2017
  • The over 50s account for more than a quarter of all zero hours work

Life for 64-year-olds has changed significantly over the past 45 years. Today’s 64-year-old is much more likely to own their home outright than 64-year old’s in 1972 (69.5% compared with 26.3% in 1972). 17.6% of today’s 64-year old’s have a degree compared with 1.6% in 1972. 64-year old’s today are more likely to have a chronic illness and disability than 64 years old in 1972 (42.1% to 52.3%).

Ben Franklin, Head of Economics at ILC-UK said:

“This year’s factpack focuses on those making the retirement transition. It shows that in some areas, such as life expectancy, we continue to be making gains, but that these gains have not been shared by everyone. Supporting longer, healthier lives must be a critical priority for government and employers.

Only through such an effort will we be able to succeed in a number of key policy areas, such as: raising State Pension Ages and securing a sustainable health and care system.  Moreover, given the tightening of the labour market, and uncertainty over future migration policy, it is more imperative than ever that employers find ways to retain older workers”.

Nigel Howell, Chief Executive of FirstPort, added:

“Through our Retirement Property Services division, FirstPort manages retirement homes that help residents stay active, socially connected, and independent for as long as possible. Increasingly, this also means ‘economically active’ with residents continuing to work well into their sixties and beyond. This new trend can bring real benefits, both for society at large and to the quality of life for the individual.

“The insight that ILC-UK’s research and Factpack provides helps all of us – industry and government – to do better for everyone, and we are very proud to support it.”

When I’m 64 also highlights that:

  • The growth of net pensioner income has stalled in recent years
  • One in five people aged 50-64 are carers
  • Proportion of individuals between the ages of 55-64 renting privately has been steadily increasing
  • Those in their 60s today are most likely to be living in couple households by the time they are in their 80s, and the proportion of households accounted for by women living alone is expected to fall from 30% to 15%. But this still means around 25% of households will consist of individuals living alone
  • In 2015, those households between 65 and 69 spent more on package holidays than other age groups
  • In 2017, 89.9% of men and 90% of women aged between 55 and 64 had used the internet in the last 3 months

Contact: David Sinclair (davidsinclair@ilcuk.org.uk) or David Eaton (davideaton@ilcuk.org.uk)
Tel: 02073400440

Notes:

Full references are available in When I’m 64: The ILC-UK Factpack on Retirement Transitions. The report will be published on the ILC-UK website on 22nd November.

Advanced copies of the Factpack are available from ILC-UK.

The report will be presented at ILC-UK’s annual Factpack Pub Quiz to take place in London on the evening of 22nd November.

About ILC-UK:

The International Longevity Centre – UK (ILC-UK) is a futures organisation focussed on some of the biggest challenges facing Government and society in the context of demographic change.
We ask difficult questions and present new solutions to the challenges and opportunities of ageing. We undertake research and policy analysis and create a forum for debate and action.

About FirstPort:

FirstPort is the largest residential property management company in the UK.

This year's Future of Ageing Conference will play host to 10 different panel debates covering everything from automating care, ageism, innovation in housing and the end of life.

Eventbrite - The Future of Ageing Conference 2017:  Transforming Tomorrow Today

Confirmed workshops and confirmed speakers include:

Opening Keynote: Dr Pol Vandenbroucke, Vice President Medical Strategy, Pfizer

How can we maximise the economic contribution of older people?

  • Diane Kenwood, Editor, Woman's Weekly and ILC-UK Trustee
  • John McTernan, Senior Vice President, PSB and Former Political Secretary to Prime Minister Tony Blair
  • Jane Ashcroft CBE, Chief Executive, Anchor
  • Professor Debora Price, President, British Society of Gerontology and Director, MICRA
  • Professor Andrew Scott, Professor of Economics, London Business School

Is the Future less or more ageist?

  • Sam Smethers, Chief Executive, Fawcett Society
  • Rt Hon Dame Margaret Hodge MP, Member of Parliament for Barking, discussing 'How to stop wasting women's talents: overcoming our fixation with youth'
  • Yasmin Boudiaf, Virtual Reality Expert, discussing 'Can we use Virtual Reality to tackle ageism?'
  • Tessa Harding, Ex-NCVO and Help the Aged

Can technology drive innovation in pensions, health and care?

  • Alison Martin, Global Head of Life and Health, Swiss Re
  • Other speakers to be confirmed

Is antimicrobial resistance a threat to longevity - and what can we do about it? 

  • Mark Chataway, Managing Director, Hyderus
  • Professor Anthony Scott, Director, The Vaccine Centre, LSHTM
  • Professor Alan Johnson, Head of AMR, Public Health England's Centre for Infectious Disease Surveillance and Control

How can we save the NHS?

  • Rt Hon Stephen Dorrell, Chair, NHS Confederation and former Health Secretary
  • Dr David Oliver, Clinical Vice President, Royal College of Physicians
  • Baroness Sally Greengross OBE, Chief Executive, International Longevity Centre - UK
  • Pamela Spence, Partner, Global Life Sciences Industry Leader, EY

More inequalities in a world of austerity? 

  • Anna Dixon, Chief Executive, Centre for Ageing Better
  • Inequalities in Life Expectancy: Andrew Gaches, Head of Longevity, Life and Financial Services, Hymans Robertson
  • Inequalities in Old Age: Professor Thomas Scharf, Professor of Social Gerontology, Newcastle University
  • Austerity and Health Across Europe: Ben Franklin, Head of Economics of Ageing, International Longevity Centre - UK

Filling the skills gap: Migration, more older workers, or both?

  • Yvonne Sonsino, Partner and Innovation Leader, Mercer and Co-Chair DWP Fuller Working Lives Business Strategy Group
  • Professor Jonathan Portes, Professor of Economics and Public Policy, King's College London
  • Dean Hochlaf, Assistant Economist, International Longevity Centre - UK

Can we automate care?

  • George Holley-Moore, Research and Policy Manager, International Longevity Centre - UK
  • Eric Kihlstrom, Co-Founder, KareInn
  • Pamela Spence, Partner, Global Life Sciences Industry Leader, EY

How can the housing industry innovate for tomorrow's older consumers?

  • Baroness Sally Greengross OBE, Chief Executive, International Longevity Centre - UK
  • Nigel Howell, Chief Executive, FirstPort
  • Gary Day, Land and Planning Director, McCarthy and Stone
  • Lord Best, Co-Chair, All Party Parliamentary Group on Housing and Care for Older People

The future of the end: Living forever or dying in style?

  • Baroness Sally Greengross OBE, Chief Executive, International Longevity Centre - UK
  • Professor Douglas Davies FBA, Professor of the Study of Religion, Durham University, and Director of the Centre for Death and Life Studies
  • Louise Winter, Founder, Poetic Endings
  • Dave Eaton, Policy and Public Affairs Manager, International Longevity Centre - UK

Closing Keynote: Professor Andrew Scott, Professor of Economics, London Business School and author of 'The 100 year life'.

Eventbrite - The Future of Ageing Conference 2017:  Transforming Tomorrow Today

There will also be a number of keynote presentations, and an open slot to allow one delegate to present their idea to help society prepare for the future of ageing.

Join us at #FutureofAgeing
For more information click here: http://www.futureofageing.org.uk/

Future of Ageing 2017: Sponsored by:

Supported by:

Press Release

For Immediate Release, Thursday, 22nd December


Think tank finds that if between 2000 and 2015 the money that was used to plug private defined benefit pension deficits had instead been redirected towards wages, average salaries would be £1,473 higher.

‘The End of the Beginning? Private defined benefit pensions and the new normal’, a report by the International Longevity Centre – UK (ILC-UK) to be published in January also reveals:

  • Since the year 2000, pension contributions have accounted for an increasingly large proportion of total employee compensation. Where wages once accounted for more than 87% of total compensation, they now account for around 83%.
  • While some of those pension contributions will be for current employees, and therefore represents deferred consumption, around half has been for servicing the deficits of DB pensions which have since closed to new members.
  • The number of retirees receiving a DB pension will remain in the millions well into the latter half of this century – 3 million by 2060 and 1 million by 2070.

The collapse of BHS and concerns over the future of Tata Steel have put the sustainability of private sector defined benefit (DB) pension schemes firmly into the spotlight. These types of DB schemes promise a set payment to their members in retirement based on salary and years of service, but there are growing concerns that many such schemes and their sponsors will be unable to fulfil their promises at a time of rising life expectancy and falling interest rates.

Through new analysis of the Office for National Statistics’ National Accounts, the report finds that if the resources used to plug rising DB deficits had been directed towards boosting the pay of current workers, wages may have been, on average, as much as 6% higher (£1,473) in 2015.

While around half of all DB schemes are now closed to new members, the number of retirees receiving a DB pension will remain in the millions well into the latter half of this century – 3 million by 2060 and 1 million by 2070.


Source: Author’s calculations based on ONS National Accounts

‘The End of the Beginning? Private defined benefit pensions and the new normal’, supported by Ince and Co LLP and to be published by the ILC-UK in January will examine the scale of the DB pensions’ challenge, outlining what its implications have been for firms and employees, and how economic and demographic trends could shape the its future.

The report will make a series of policy recommendations to help ensure the long-term sustainability of both DB schemes, and the companies and employees funding them.

Ben Franklin, Head of Economics of Ageing, ILC-UK said:

While the vast majority of private sector DB schemes have closed to new members or future accrual, their impact on individuals, firms and the economy as a whole is likely to be long felt. Our analysis suggests that plugging pension deficits has acted as an opportunity cost – supporting the pensions of retirees at the cost of investing in the current workforce. This situation will not change overnight. Based on conservative assumptions about future life expectancy and mortality, we estimate that DB pensions will continue to be paid out well into the latter half of this century.

We call on government, regulators and industry to devise solutions that move away from simply securing full member benefits and towards those that build in a recognition for the wider societal and economic challenges associated with continued DB pension deficits. 

Jennifer Donohue, Head of Global Corporate and Transactional Insurance, Ince and Co LLP said:

Company executives, pension trustees and all DB stakeholders need to adapt to a society where funds of DB schemes cannot provide for forty or fifty years of  retirement. Recognition of this legacy issue, and finding solutions to it, is the responsibility of all stakeholders, corporates, the government and scientists as we face a United Kingdom where a third of all babies born three years ago are now predicted to live to a hundred years old.

There is a nascent market of “gifted structurers” who can provide short, medium and long term (some as long as sixty years) solutions to the deficits problem. These solutions need to be accepted, expanded and developed if a societal calamity is to be avoided.

Notes

‘The End of the Beginning? Private defined benefit pensions and the new normal’ will be launched on Wednesday, 18th January with a panel debate of pensions policy experts. If you are interested in attending, please contact Dave Eaton at davideaton@ilcuk.org.uk.

Contact

Dave Eaton (davideaton@ilcuk.org.uk on 07531 164 886)

About us

The International Longevity Centre – UK (ILC-UK) is a futures organisation focussed on some of the biggest challenges facing Government and society in the context of demographic change.

We ask difficult questions and present new solutions to the challenges and opportunities of ageing. We undertake research and policy analysis and create a forum for debate and action.

Our policy remit is broad, and covers everything from pensions and financial planning, to health and social care, housing design, and age discrimination. We work primarily with central government, but also actively build relationships with local government, the private sector and relevant professional and academic associations.

Economic Insight by the International Longevity Centre – UK (ILC-UK), published following the Autumn Statement, paints a bleak picture for future pensioners. ILC-UK analysis reveals that:

  • By 2022, economic output per person will be over 25% smaller than we would have expected it to be before the crisis. This economic weakness has impacted on household finances.
  • Real wages will be £11,600 (or 31%) below what we would have expected them to be before the crisis. This has made it harder to save.
  • Bank Rate is expected to remain firmly in the zero lower bound, while returns on long dated government bonds are likely to remain at historically low levels. This means savings will not go as far.
  • The household savings ratio has been falling and is expected to remain low up to 2022. This is despite the continued roll out of automatic enrolment.

Ben Franklin, Head of Economics at ILC-UK said:

“The picture painted by the Autumn statement is bad economic news for savers, but this does not mean the Government should shy away from its long run objective of supporting private savings through automatic enrolment. Government needs to think carefully about how to square the circle and deliver increased savings alongside economic growth.”

ILC-UK Economic Insight “Autumn Statement 2016: What does it all mean for UK savings?” has been published on the ILC-UK website at www.ilcuk.org.uk

The ILC-UK Economic Insight has been supported by the ILC-UK Partners Programme. Members of ILC-UK Partners Programme include Anchor; Audley; Aviva; Centre for Ageing Better; Equiniti; EY; FirstPort; Hymans Robertson; Legal & General; Newcastle University Institute for Ageing; Partnership; Prudential. 


Ends

Contact: Dave Eaton: Davideaton@ilcuk.org.uk 020 7340 0440

The International Longevity Centre – UK (ILC-UK) is a futures organisation focussed on some of the biggest challenges facing Government and society in the context of demographic change. We ask difficult questions and present new solutions to the challenges and opportunities of ageing. We undertake research and policy analysis and create a forum for debate and action.

Since our August update, we have launched four new reports, including an analysis of future care sector workforce shortages in the context of Brexit, and a review of financial capability interventions and older people in retirement.

We have also opened bookings for a December event on new approaches to means-testing and funding adult social care, and limited spaces are still available for the 2016 Future of Ageing Conference.

These updates are sent every couple of months. If you would like to keep on top of our latest news, please follow us on Twitter, Facebook or our LinkedIn Group.

 

ILC-UK's Future of Ageing Conference less than one month away

George Sinclair, age 9, explains the urgent need to address the challenges posed by our rapidly ageing society

The Second Annual Future of Ageing Conference
Wednesday, 9th November 2016; Central Hall Westminster, Storey's Gate, London, SW1H 9NH

Current confirmed speakers include:

  • Dr Islene Araujo de Carvalho, Senior Policy and Strategy Adviser, Department of Ageing and Life Course, WHO
  • John Cridland CBE, Head of the Independent State Pension Age Review
  • Jonathan Stevens, Senior Vice President, Thought Leadership, AARP
  • John Pullinger CB, National Statistician, UK Statistics Authority
  • The Rt Rev. and the Rt Hon. the Lord Carey of Clifton, Archbishop of Canterbury 1991-2002
  • Professor Sarah Harper, Director, Oxford Institute of Population Ageing
  • David Sinclair, Director, ILC-UK
  • Dwayne Johnson, Director of Social Care and Health at Sefton Metropolitan Borough Council
  • Dr Maragaret McCartney, GP and regular contributor on Radio 4’s Inside Health, and
  • Linda Woodall, Director of Life Insurance and Financial Advice, and sponsor of the Ageing Population project, Financial Conduct Authority

For more information and to register to attend, click on the below link
ILC-UK 2016 Future of Ageing Conference

We are grateful to McCarthy & Stone for their sponsorship of this conference.

Further support has kindly been received from Action on Hearing Loss, lip reading practice and Drink Wise, Age Well.

We have a number of promotional opportunities for organisations wishing to be involved in the 2016 Future of Ageing Conference. For full details, please click here.

We are also happy to work with organisations on bespoke packages. If you would like to discuss sponsorship and the various packages in more detail, please contact Lyndsey Mitchell on lyndseymitchell@ilcuk.org.uk.

 

Support the work of the International Longevity Centre - UK

As an independent charity with no core funding, the ILC-UK relies upon the support of our Partners Programme and individual research commissions to operate.

If you would like to support our work producing research and policy analysis and hosting around 50 free-to-attend events a year, you can now donate to the ILC-UK via the secure BT My Donate portal below.

Any support you can provide would be greatly appreciated, and will allow us to continue to address the greatest challenges facing Government and society in the context of our rapidly ageing society and demographic change.

Please click here to donate to the ILC-UK

 

ILC-UK Publications

Brexit and the future of the migrant social care workforce
In this follow up to ILC-UK's 2015 report ‘Moved to Care’, ILC-UK and Independent Age update the analysis of the future workforce shortages in adult social care in England to take account of the EU referendum result of the 23rd June.

Still not ready for ageing
The Ready for Ageing Alliance assess the Government's response to our rapidly ageing society and finds the UK is still not ready.Far from seeing sustained progress over the past few years, society is seemingly going into “reverse gear” in some respects.

What works? A review of the evidence on financial capability interventions and older people in retirement
Commissioned by the Money Advice Service and the UK Financial Capability Strategy, this report carried out an extensive scoping review to establish which financial education programmes designed to improve financial capability amongst older people are effective.

Pension coverage and pension freedoms: Lessons from Hong Kong
This think-piece looks to Hong Kong,  whose pension infrastructure is similar to the one emerging in the UK to examine the potential impact of the UK's recent pension reforms.

 

ILC-UK Events

Costing care: New approaches to means-testing and funding adult social care

Wednesday 14th December; 16:00 (for a 16:30 start) - 18:30 (followed by a short drinks reception)
Staple Inn Hall, Institute and Faculty of Actuaries, High Holborn, London WC1V 7QJ

This ILC-UK, IFoA and Cass Business School joint event will launch a new paper which reviews the present and proposed formula for means-testing adult social care in England.

Chaired by Baroness Sally Greengross OBE, Chief Executive of the ILC-UK, the launch will include a keynote presentation from report author, Professor Les Mayhew, Professor of Statistics, Faculty of Actuarial Science and Insurance, Cass Business School, and a response from an expert panel of actuaries and related professionals.

Limited spaces are still available for this event.
Please click here to register for this event

 

ILC-UK Blogs

Since our August update, we have published analysis on how best to support tomorrow's workforce; addressing the persistence of poverty across Europe; the dilemma faced by central banks, and guest blogs from a variety of expert contributors.

Blogs written by ILC-UK researchers include 'Are immigrants driving down wages in the adult social care sector?', 'Coming soon to a welfare state near you? A universal basic income', and 'Creeping protectionism and population ageing: a lethal combination'. ILC-UK economists Ben Franklin and Dean Hochlaf have also published an ILC-UK Economic Insight report into the challenges facing central banks in the context of the economic 'new normal'.

Our guest blogs have included articles from Audley Chief Executive Nick Sanderson on 'Downsizing and the housing black hole', and from Claire Turner, Interim Director of Evidence at the Centre for Ageing Better on 'Ageing: the things we don't talk about'.

We have also published three guest blogs as part of our 'Future of Ageing' series: researchers from the Centre for Health Economics and Medicines Evaluation have published on 'Developing and evaluating sustainable services in an ageing society'; Clare Bambra, Professor of Public Health Geography at Durham University has written on how 'Where you live can kill you', and Dr Marianne Coleman, Emeritus Reader in Educational Leadership as written on 'The future challenges and opportunities of health and care in an ageing society'.

We also regularly publish our Friday Five: five key facts about issues related to ageing.

To read these and all our blogs, please click here.

 

Partners Programme

Membership of our Partners Programme is open to companies and not for profit organisations. Benefits of membership include: a discount on research, guaranteed spaces at events, your logo on 3 events and 3 reports per year, and advanced copies of ILC-UK research. We also provide information and advice consultancy services to our Partners and organise exclusive events.

Partners are exposed to the latest available research and data in the UK, EU and the rest of the world. Partners are helped to understand and plan for changing societal trends and given opportunities to participate in cutting-edge debates to help them remain ahead of policy curves.

The current ILC-UK Partners are: Anchor, Audley, Aviva, Centre for Ageing Better, Equiniti, EY, FirstPort, Hymans Robertson LLP, Legal & General, Newcastle University Institute for Ageing, Partnership and Prudential.

For more information, see the Partners Programme brochure or contact David Sinclair, davidsinclair@ilcuk.org.uk.

 

Working with ILC-UK

RESEARCH AND EVENTS
Research and events produced by ILC-UK are made possible by funding from various sources. If you are interested in commissioning ILC-UK research or supporting an ILC-UK event, please contact David Sinclair, davidsinclair@ilcuk.org.uk.

PRESS
If you would like to receive ILC-UK press releases, please email events@ilcuk.org.uk and we will add you to our press release list.


The Rt Hon. Stephen Dorrell, Chair of the NHS Confederation and former Secretary of State for Health and former Chair of the Health Select Committee, and Dwayne Johnson, Director of Adult Social Care, Sefton Metropolitan Borough Council have agreed to join our fantastic list of speakers at the Future of Ageing conference.

Dr Margaret McCartney, GP, author and regular contributor on Radio 4’s Inside Health, will also present at the conference. Dr Islene Araujo de Carvalho of the Department of Ageing and Life Course at the World Health Organisation will also focus on health and care issues, taking a more global perspective.

Conference attendees will also hear from:

  • John Cridland CBE, Head of the Independent State Pension Age Review
  • John Pullinger CB, National Statistician, UK Statistics Authority
  • Professor Sarah Harper, Director, Oxford Institute of Population Ageing
  • Linda Woodall, Director of Life Insurance and Financial Advice, and sponsor of the Ageing Population project, Financial Conduct Authority
  • Jonathan Stevens, Senior Vice President, Thought Leadership, AARP
  • David Sinclair, Director, International Longevity Centre - UK
  • The Rt Hon. the Lord Carey of Clifton, Archbishop of Canterbury 1991-2001

Join as at the Future of Ageing Conference on Wednesday, 9th November. Our Earlybird prices must end on 31st August, so sign up now to take advantage of this special discounted rate.

 

For Immediate Release

In an increasingly complex financial world, responsibility for financial decision-making is progressively being shifted onto the individual. Yet a new report, published by the International Longevity Centre UK, reveals we don’t know enough about how to help people be more financially savvy in their old age.

The end of compulsory annuitisation puts more responsibility on older people to actively manage their retirement income. For some older people, managing money in a digital world poses significant challenges. Others find the challenge of managing debt in old age worrisome. 

A number of studies have found that financial capability, defined as a person’s ability to manage money well, both day to day and through significant life events, is an essential prerequisite for sound financial decision-making. People with higher financial capability save and plan more for retirement, invest in the stock market and hold better differentiated portfolios, they choose cheaper mortgages, shop around for the best financial products and buy cheaper annuities. They are also less likely to be over-indebted and generally feel less anxious about their financial life.

Previous ILC-UK research has shown that of those aged over 55 with a private pension but not yet retired, only half understood what an annuity was “quite or very well”. Income drawdown was even less well understood. ILC-UK research has also revealed that older people have lower levels of numeracy than the young.

Yet, whilst there is a need to increase levels of financial capability among older people, a new review by the International Longevity Centre -UK (ILC-UK) finds that there isn’t enough evidence out there of what actually works.

‘What works? A review of the evidence on financial capability interventions and older people in retirement’ was commissioned by the Money Advice Service on behalf of the UK Financial Capability Strategy. The report carried out an extensive scoping review to establish which financial education programmes designed to improve financial capability amongst older people are effective.

The report examined different financial domains to determine which interventions were most successful in helping older people to manage their money and plan for later life. It found that while users of programmes designed improve money management generally report high levels of satisfaction and feeling more informed a lack of impact evaluation means that there is currently limited evidence of the impact of these programmes on financial behaviour.


Dr Cesira Urzì Brancati, Research Fellow, ILC-UK said:

“The world of money is becoming more complex and older people are more diverse in their experience and needs. Some older people need help understanding how to manage money. Others may need support with investments.

“We need to do all we can to reduce the risk of more older people becoming victims of scams or abuse. Helping people better understand and manage their money has to be part of the solution.

“But while there is a need to raise financial skills across our lives, our research reveals that we simply don’t adequately know how to best help people.”

David Haigh, Director of Financial Capability at the Money Advice Service, said:

“This report highlights how little we know about how best to improve the financial capability of older people.  Whilst there are a number of interventions targeted at older people, there is little reliable and robust evaluation of whether they are truly effective.

“That’s why the Money Advice Service recently announced the launch of the £7m What Works Fund.  This fund is explicitly designed to help organisations carry out a robust evaluation of interventions they are delivering to improve financial capability.  By learning more about what is really effective, we can seek to ensure resources and funding are focussed on interventions that really make a difference.

“Generally, research shows that older people are financially capable. However, they face challenges around low levels of digital literacy and lack of planning for long term care. Discovering what works and targeting effective interventions in these areas will ensure that older people are able to effectively manage their money throughout later life.”

Anna Dixon, Chief Executive of the Centre for Ageing Better, said:

"We know that financial security is an important aspect of a good later life. Building financial capability among older people as well as those approaching retirement is an important part of ensuring that people are able to manage their money in later life.

This report highlights the limited evidence on ‘what works’ to increase financial capabilities among older people in retirement. 12.2 million people are projected to face inadequate retirement incomes.

The Centre for Ageing Better wants more people to feel prepared for later life. We welcome the launch of the £7 million fund by MAS and look forward to the learning which will emerge.”


Notes
The International Longevity Centre – UK (ILC-UK) is a futures organisation focussed on some of the biggest challenges facing Government and society in the context of demographic change.

Much of our work is directed at the highest levels of Government and the civil service, both in London and Brussels. We have a reputation as a respected think tank which works, often with key partners, to inform important decision-making processes.

Our policy remit is broad, and covers everything from pensions and financial planning, to health and social care, housing design, and age discrimination. We work primarily with central government, but also actively build relationships with local government, the private sector and relevant professional and academic associations.

Since our June update, we have launched five new reports, including a landmark publication on the future of the UK welfare state; a report on the economic benefits of migration; and our annual factpack, which this year focuses on the state on the nation's housing.

We also extended the early bird rate for the 2016 Future of Ageing Conference to Wednesday, 31st August, and held our second national retirement income summit at the Chartered Insurance Institute.

These updates are sent every couple of months. If you would like to keep on top of our latest news, please follow us on Twitter, Facebook or our LinkedIn Group.


ILC-UK hosts the first Ageing Society pub quiz to launch 'The state of the nation's housing: An ILC-UK Factpack'

On Monday, 18th July ILC-UK hosted the first Ageing Society Pub Quiz to launch 'The state of the nation's housing: An ILC-UK Factpack', supported by FirstPort. Attendees competing across 13 teams tested their knowledge of everything from the issues surrounding an ageing society, to whether the cumulative age of ILC-UK staff was higher or lower than that of the current members of the Rolling Stones.

Thank you to everyone who participated!

 

ILC-UK Publications

The state of the nation's housing: An ILC-UK Factpack
Despite significant increases in the numbers of older people living alone, half of all older people with care needs haven’t made adaptations to their homes to make them easier to live in. Whilst specialist retirement housing can offer more adaptations and play a part in supporting downsizing, the report also finds that the retirement housing supply gap is set to worsen.

Measuring state effectiveness: an ILC-UK index
This technical report presents a new index for measuring State Effectiveness, and comparative performance analysis of countries across Europe. The report warns that 'silver welfare', the strategy of focusing spending on social protection for old age is the only strategy consistently associated with bad outcomes.

Towards a new age: The future of the UK welfare state
This landmark publication features contributions from more than 20 leading public figures on the reforms necessary to ensure the future of the welfare state. 'Towards a new age' provocatively argues that if governments make policy based purely to get re-elected, the welfare state could become so distorted that it might sow the seeds of its own demise.
A future of the welfare state thinkpiece

Innovate to Alleviate: Exploring how the role of an enhanced care worker could address skills shortages in the social care sector
This report, commissioned by the Department for Health, is the first to examine a newly developed role in the adult social care sector. The first scoping review of its kind, the report is a qualitative investigation compiled from interviews with individuals from all levels of the care home sector.

Immigration: Encourage or deter?
This report demonstrates that migration could boost the UK economy by £625 billion (or 11.4%) by 2064-65. It also finds that migration is likely to support the sustainability of government finances, and that raising the State Pension Age alone will not stabilise the UK's declining dependency ratio.

 

ILC-UK Events

Housing in an Ageing Society
Wednesday 12th October; 10:00 (for a 10:30 start) - 12:30; Legal & General

On Tuesday, 19th July we launched 'The state of the nation's housing', with the support of FirstPort.

This special half day event on Wednesday, 12th October will feature discussion and debate amongst industry experts and Government on the topic of Housing in an Ageing Society.

Speakers include:

  • Lord Bourne of Aberystwyth, Newly appointed Parliamentary Under Secretary of State at the Department for Communities and Local Government;
  • Nigel Wilson, Group Chief Executive, Legal & General
  • Dr Brian Beach, Research Fellow, ILC-UK.

This event is fully subscribed, and is operating a waiting list.
Eventbrite - Housing in an Ageing Society


The Second Annual Future of Ageing Conference
Wednesday, 9th November 2016; Central Hall Westminster, Storey's Gate, London, SW1H 9NH

We are pleased to announce that since our June update a further two new keynote speakers have been confirmed for the Future of Ageing 2016. We have also extended our early bird rates until the end of August 2016.

Current confirmed speakers include:

  • Dr Islene Araujo de Carvalho, Senior Policy and Strategy Adviser, Department of Ageing and Life Course, WHO
  • John Cridland CBE, Head of the Independent State Pension Age Review
  • Jonathan Stevens, Senior Vice President, Thought Leadership, AARP
  • John Pullinger CB, National Statistician, UK Statistics Authority
  • The Rt Rev. and the Rt Hon. the Lord Carey of Clifton, Archbishop of Canterbury 1991-2002
  • Professor Sarah Harper, Director, Oxford Institute of Population Ageing
  • David Sinclair, Director, ILC-UK
  • Dr Maragaret McCartney, GP and regular contributor on Radio 4’s Inside Health, and
  • Linda Woodall, Director of Life Insurance and Financial Advice, and sponsor of the Ageing Population project, Financial Conduct Authority

Eventbrite - The Future of Ageing, an ILC-UK Conference

We are grateful to McCarthy & Stone for their sponsorship of this conference.

Further support has kindly been received from:

    

 

We have a number of promotional opportunities for organisations wishing to be involved in the 2016 Future of Ageing Conference. For full details, please click here.

We are also happy to work with organisations on bespoke packages. If you would like to discuss sponsorship and the various packages in more detail, please contact Lyndsey Mitchell on lyndseymitchell@ilcuk.org.uk.

 

ILC-UK Blogs

Since our June update, we have published ILC-UK analysis on the reform of nursing bursaries and the end of Osbornomics, and a variety of blogs from expert guest authors.

Blogs written by ILC-UK researchers include an assessment of reforms of nursing bursaries, lessons from Asia and the rest of the world on maximising the potential of an ageing population, a summary of the Drink Wise, Age Well Inquiry and the end of Osbornomics.

Our guest blogs have included articles on getting young people saving (Michelle McGagh, freelance journalist); on why declining dopamine may explain why older people take fewer risks (Dr Robb Rutledge, Senior Research Associate, Wellcome Trust Centre for Neuroimaging, UCL); and insights into the motivations of young and old voters in the EU referendum (Dr Stuart Fox, Quantitative Research Associate, Wales Institute of Social & Economic Research, Data & Methods).

We have also published guest blogs on combating ageism, fear and loathing in Brexit Britain (Jilly Forster, Founder, Forster Communications) and the difficult conversations people avoid as they get older (Claire Turner, Interim Director of Evidence, Centre for Ageing Better)

We also regularly publish our Friday Five: five key facts about issues related to ageing.

To read these and all our blogs, please click here.

 

Partners Programme

Membership of our Partners Programme is open to companies and not for profit organisations. Benefits of membership include: a discount on research, guaranteed spaces at events, your logo on 3 events and 3 reports per year, and advanced copies of ILC-UK research. We also provide information and advice consultancy services to our Partners and organise exclusive events.

Partners are exposed to the latest available research and data in the UK, EU and the rest of the world. Partners are helped to understand and plan for changing societal trends and given opportunities to participate in cutting-edge debates to help them remain ahead of policy curves.

The current ILC-UK Partners are: Anchor, Audley, Aviva, Centre for Ageing Better, Equiniti, EY, FirstPort, Hymans Robertson LLP, Legal & General, Newcastle University Institute for Ageing, Partnership and Prudential.

For more information, see the Partners Programme brochure or contact David Sinclair, davidsinclair@ilcuk.org.uk.

 

Working with ILC-UK

RESEARCH AND EVENTS
Research and events produced by ILC-UK are made possible by funding from various sources. If you are interested in commissioning ILC-UK research or supporting an ILC-UK event, please contact David Sinclair, davidsinclair@ilcuk.org.uk.

PRESS
If you would like to receive ILC-UK press releases, please email events@ilcuk.org.uk and we will add you to our press release list.

ILC-UK analysis highlights progress made over past decade but find that

  • median contribution rates are falling and a growing proportion of us have no savings
  • the average time spent in retirement continues to increase

Ten years to the day after the final report of the Pension Commission, the International Longevity Centre – UK (ILC-UK) have announced its second National Retirement Income Summit.

The Pensions Commission painted a future where individuals would need to do a combination of working longer, saving more, or paying more tax. The Commission argued that a failure to act would lead to poorer pensioners.

ILC-UK analysis, published today, highlights positive progress in extending working lives, preventing pensioner poverty and getting more people into saving. But the think tank warns of complacency and paints a bleak picture for future pensioners.

ILC-UK analysis, published on its website finds that since the Pensions Commission

  • The average age of exit from the labour force is increasing but it is still below what it was in the 1960s and 1970s
  • In fact, the average time spent in retirement continues to increase
  • Auto-enrolment has delivered a growing number of employees with workplace pensions
  • But median contribution rates are low and a growing proportion of us have no savings. Final Salary pension coverage continues to fall
  • Younger people are less well placed than previous generations to save and may attract lower long term returns on their savings
  • Effective tax rates have been falling but have increased more recently
  • Spending on pensioner benefits slightly above the long run average as a percentage of GDP.

ILC-UK’s second Retirement Income Summit will be hosted by the Chartered Insurance Institute on 10th June 2015. Registration is open now. Confirmed speakers at the event include: Baroness Jeanie Drake; Steve Webb (Royal London); Gregg McClymont (Aberdeen Asset Management); Professor David Blake (Cass); Chip Castille (Blackrock); and Michelle Cracknell (TPAS).

In 2012, ILC-UK organised its first Retirement Income Summit which provided a platform for discussion between 180 policymakers, senior insurance industry experts, business representatives, charities and academics.

ILC-UK Chief Executive, Baroness Sally Greengross saidThe Pensions Commission can claim credit for successful public policy change. Auto-enrolment has enrolled many more people into the long term saving habit.

Relative pensioner incomes have increased due to a combination of later retirement, the pensions “triple lock” and increased earning power of the baby boomers.

However, the future for retirement income looks less rosy. Ongoing demographic change, low in work earnings growth, and low investment returns are contributing to significant uncertainty. The new “single tier” pension will be less generous for the majority in the long term. Fewer people will find themselves receiving the more generous final salary pensions.

With the onset of pension freedoms, retirees over the next 20 years will face many more options. Making the wrong decision could result in people living longer than their money or result in under-consumption as people worry about making their money last.  Navigating the retirement income maze will require better information, advice and financial capability.

The Chartered Insurance Institute agrees that such a Pensions Commission would be the better approach given the complexities of the wider personal pensions taxation. David Thomson, Director of Policy & Public Affairs saidNow that the Budget has been published and Lifetime ISAs unveiled to improve savings among younger adults, these announcements afford the Government extra time to revisit the idea of a Pensions Commission to explore the more complex question of wider pensions tax relief.”

“We said over a year ago that the Government may be tempted by short-term political and fiscal expediency of widening the Taxed-Exempt-Exempt ISA model to private pensions more generally. However such a move has longer-term economic, demographic and intergenerational implications that are exercising most, if not all, western industrial societies. Any major reform needs to have broad-based support both among policymakers and across society and a Pensions Commission might prove to be an elegant solution to achieve this.

Contact

Dave Eaton or David Sinclair, ILC-UK 02073400440

The ILC-UK Retirement Income Summit will take place on Friday 10th June 2016; 09:15 - 16:30 (followed by a short drinks reception). The Chartered Insurance Institute, 20 Aldermanbury, London EC2V 7HY. Spaces for the retirement income summit can be booked at: http://www.ilcuk.org.uk/index.php/events/second_national_retirement_income_summit

Responding to the latest Aviva Working Lives report, David Sinclair, Director, International Longevity Centre – UK (ILC-UK), said:

Ten years on from final Pension Commission report, we see more people saving due to the success of auto-enrolment. Now is the time to build on this success.

Almost half of those working later than they hoped, are doing so because they haven’t saved enough. Whilst we have more people saving, the levels are woefully inadequate, particularly given we are living longer. Investment returns remain relatively low so even those who are saving aren’t getting the return they hoped for.

With the Cridland review exploring further increases to state pension age, future pensioners should be prepared to need to work longer. But this isn’t necessarily a bad thing. As the research points out, for many older people, working longer provides a “feelgood factor”.

Government and employers must find ways of ensuring that older people aren’t forced out of the workforce prematurely. The benefit of extending working lives goes beyond the benefit to individuals. UK plc faces a significant economic hit if we don’t better adapt workplaces to cope with demographic change.

On 10th June, ILC-UK are organising their second Retirement Income Summit.

ILC-UK publishes new analysis to feed into FCA and HM Treasury Financial Advice Market Review


Ensuring policy and practice raises confidence in the provision of advice is key to increasing uptake, argues the International Longevity Centre - UK (ILC-UK) in their submission to the Financial Advice Market Review (FAMR).


The ILC-UK has undertaken new analysis of the Wealth and Assets Survey (WAS) (1) to feed into their submission. The analysis finds that:

 

  • Approximately 18.2 million people took out a financial product in the last two years, with nearly 3.1 million investing in risky assets.
  • Among the 43.5% who have taken out a financial product in the last two years, approximately 1 in 10 (11.2%) had been influenced by an Independent Financial Adviser. In terms of overall population, this is equivalent to approximately 2 million people.
  • Worryingly, 2.7 million people took out a financial product in the last two years without collecting any information at all.

The ILC-UK reveal that best buy comparison websites most influenced decisions about which product to take out, followed by information from providers.  In making product decisions:

  • 6.1 million people were influenced by “Best buy information, comparison website or shopped around a lot of different sources”;
  • Approximately 2 million were influenced by an “Independent Financial Adviser”;
  • Roughly 3.9 million were influenced by “Information collected from providers or providers websites”;
  • About 1.7 million were influenced by friends or family;

The ILC-UK analysis reveals that older (age 55+) consumers are significantly more likely to influenced by IFAs or providers, than by best buy information on websites.

Consumers who indicated IFAs as the most trustworthy source for retirement income advice, were significantly more likely to have been influenced by an IFA when choosing to take out a financial product.

Homeowners are also significantly more likely to be influenced by an IFA when choosing to take out a financial product. While only 1 in 16 renters (who have taken out a financial product) are likely to be influenced by an IFA, the proportion rises to 1 in 8 for homeowners.

There is greater awareness of the value of IFAs amongst those purchasing potentially risky investments. (2) ILC-UK find that the proportion of people influenced by IFAs doubles for people buying these products.

Consumers who are most financially able, i.e. those who report that they know exactly how much they have in their bank account, are also more likely to choose DIY financial solutions, by surfing best buy websites or shopping around.

The number of people not collecting any information or just relying on friends and family before taking out a financial product is large – about 4.4 million. Among them, older consumers (aged 75 plus) tend to be over-represented.

ILC-UK point out that those who are burdened by debt do not reach out. Among consumers who felt burdened by debt (approximately 17% of the sample), only about 1 in 8 (or 12.7%) received any advice at all to help them deal with their debts, and among them, 3 in 5 received advice from a free agency.

Cesira Urzì Brancati, Research fellow at the ILC-UK said:

The demand for independent financial advice is mainly driven by trust. We will not expand access to advice without action to raise trust in advice.

Sadly, advice too often does not reach those who need it the most. For some, however, overconfidence is an impediment to getting advice.

Making financial advice mandatory may not have good results. Experimental evidence from the US showed that unsolicited advice has no effect on investment behaviour – only those who want advice and ask for it will act accordingly.[1]

Our research highlights again the importance of Government and industry supporting a mid retirement financial health check. We need to ensure that people making important financial decisions in their 70s and beyond, get the support they need”.

On 1st December, the ILC-UK published Understanding Retirement Journeys, a report, supported by Prudential, which explored consumption in later life. In the report, ILC-UK called for the introduction of a mass market mid-retirement financial health check and financial advice. The Think Tank also called for the development of new rules of thumb to be built into the financial guidance process.(3)

Contact

Ben Franklin (benfranklin@ilcuk.org.uk) or Cesira Urzì Brancati (CesiraUrziBrancati@ilcuk.org.uk) at ILC-UK on 02073400440

Notes
1) The ILC-UK analysis takes advantage of the largest and most comprehensive source of information on income, wealth and assets in Great Britain, the Wealth and Assets Survey (WAS). The WAS is a longitudinal survey, which means that the same individuals are followed over time, and it is representative of all private households in Great Britain. For the purpose of our analyses, we focus on the latest wave, i.e. data collected between 2010 and 2012, and we keep only individuals aged 16+ who completed the entire interview. We are, therefore, left with a remarkably large sample of 37,601 observations.

2) By investments we mean an equity ISA, PEP, unit trust or investment trust, investment bond, stocks and shares or an endowment policy that was not linked to a mortgage.

3) See http://www.ilcuk.org.uk/index.php/news/news_posts/press_release_researcg_busts_the_myth_of_a_hedonistic_retiree_population
The ILC-UK response to the FCA and HM Treasury Financial Advice Market Review will be published on the ILC-UK website on 18th December 2015.
The International Longevity Centre - UK (ILC-UK) is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change. It develops ideas, undertakes research and creates a forum for debate.

The International Longevity Centre – UK (ILC-UK) is organising its first major all day conference on The Future of Ageing, on Tuesday 24th November 2015 in London.

Confirmed speakers include:

  • Baroness Altmann (Minister or Pensions);
  • Professor Sir Mark Walport (Government Chief Scientific Adviser [GCSA] and Head of the Government Office for Science);
  • David Willetts (Executive Chair at Resolution Foundation, and former Minister of State [Department for Business, Innovation and Skills]);
  • Lord Filkin (Chair of the Centre for Ageing Better and Chair of the House of Lords Committee on Public Service and Demographic Change);
  • Paul Johnson (Director, Institute for Fiscal Studies);
  • Steve Groves (Chief Executive Officer at Partnership);
  • Professor Jane Elliott (Chief Executive, Economic and Social Research Council);
  • Steven Baxter (Partner, Hymans Robertson); and
  • Professor Ian Philp (Deputy Medical Director for Older People’s Care, Heart of England NHS Foundation Trust) will be speaking at the conference.

The conference will be chaired by Baroness Sally Greengross (Chief Executive, ILC-UK) and Lawrence Churchill (Trustee, ILC-UK).

ILC-UK are grateful to McCarthy & Stone and Partnership for their sponsorship of this conference.

Bookings can be made through the ILC-UK website.

On the 24th November 2015, ILC-UK will be holding a day conference on ‘The Future of Ageing’. We will paint a picture of the future of ageing and explore the challenges and opportunities ahead.Through our unique lifecourse focus we will explore the potential impact of ageing not just on today’s older population, but also on tomorrow’s.

Register to attend the conference here.

We invite organisations to be involved in this event through various promotional opportunities, from exhibition space on the day and advertising space in the event programme to publicity and free delegate spaces.

During the conference, we will focus on five key areas: The future challenges and opportunities of health and care in an ageing society; The future of retirement income: Wealthy pensioners or persistent poverty?; The future of our economy in an ageing society: Adapting our economy to ageing?; The future of our built environment in an ageing society; and The future of ageing research.

We are delighted to confirm that Professor Sir Mark Walport (Government Chief Scientific Adviser [GCSA] and Head of the Government Office for Science), David Willetts (Executive Chair at Resolution Foundation, and former Minister of State [Department for Business, Innovation and Skills]), Lord Filkin (Chair of the Centre for Ageing Better and Chair of the House of Lords Committee on Public Service and Demographic Change) and Paul Johnson (Director, Institute for Fiscal Studies) will be speaking at the conference.

Promotional Packages are included the below table. However, we would be very happy to speak with organisations to put together a package that suits your requirements and budget.

To receive a full Promotional Opportunities brochure, or to discuss these opportunities in more detail, please contact Lyndsey Mitchell, Office and Events Manager at ILC-UK, on events@ilcuk.org.uk or 0207 340 0440.

  • Think tank urges continued focus on preventing ill health as research highlights that ill health and inactivity is not inevitable.
  • Age UK announce plans for annual “Greengross Lecture”

A new factpack published today by the International Longevity Centre – UK (ILC-UK) (1) illustrates the realities of living to 80 for the 367,000 people reaching the milestone age this year.

Inspired by ILC-UK Chief Executive and founder, Baroness Sally Greengross, who turned 80 on the 29th of June this year, 80 at Eighty (2) gives 80 facts about life in your 9th decade.

Across the world, the number of people aged 80 plus has increased from 15 million (1950) to 110 million (2011). By 2050 the number aged over 80 is estimated to reach 400 million.

This factpack incorporates new analysis by ILC-UK of the English Longitudinal Study of Ageing by ILC-UK. 80 at Eighty reveals:

Many English 80 year olds remain very active…

  • In England over 16,000 people aged 80+ are still in paid employment.
  • People aged 80+ may be more satisfied with their sex lives, as 67.9% report the frequency to be about right, in contrast to 54.5% of those aged 50-64.
  • More than half (55%) of men aged 80+ are married (or in a civil partnership) vs. 21% of women.

But health problems are common…

  • Around 16% of those aged 80-84 have already survived a heart attack.
  • 49% of women and 38% of men aged 80+ are often troubled with physical pain.
  • 50.8% of men and 56.7% of women aged 80 and over report having a limiting long standing illness.
  • Over one in ten of those aged 80-84 have some kind of dementia

Alongside Baroness Greengross, Julie Andrews, the Dalai Lama, Woody Allen and Norman Foster turn 80 this year. Elvis would have been 80 this year.

80 at Eighty was launched at a reception hosted by Age UK this week. During the reception, Age UK announced plans for the introduction of an annual “Greengross” lecture.

Baroness Altmann CBE, Minister of State for Pensions said
“I welcome this year’s edition of the Factpack, building as it does on the high quality research that has been the hallmark of ILC UK’s work over a number of years. In common with much of ILC UK’s research, this usefully highlights the importance of addressing the challenges and opportunities of our ageing society. Improving quality of later life is an important goal which can benefit increasing numbers of people.”

Baroness Greengross, ILC-UK Chief Executive said
“It is brilliant to see how many 80 year olds remain active. There were 17 runners in this year’s London Marathon aged over 80.  But 80 at Eighty also highlights the day to day challenges faced by too many people into their 80s and beyond.
The priority for me, as I pass my own 80th birthday, is to focus policy effort on ensuring more and more 80 year olds are healthier longer. Growing numbers of people aged into their 80s and 90s is great news, particularly if we can better prevent the multiple illnesses that can destroy wellbeing in later life.

Caroline Abrahams, Charity Director for Age UK said:
“It is fantastic that there are more over-80s in our society than ever before and that this age group is increasing more quickly than any other.

"Growing numbers of these people are making significant contributions to their families and communities - indeed to our country - and in the process they are dismantling ageist stereotypes about what it is to be 'old'.

"No one epitomises this better than Baroness Sally Greengross, who has had a long and distinguished career supporting older people that she shows no sign of giving up, and who herself is joining the over-80s club this year.

"Age UK is therefore delighted to announce that from 2016 we will host an annual Greengross Lecture in Sally's honour. Our intention is that the Lecture will champion later life and the person or people who have made a really big difference to it that year - a fitting tribute we hope to all that Sally has done and continues to do."

1.4 million older people face inadequate retirement incomes after pension freedoms day

  • 1.1 million people face inadequate incomes even if they choose to annuitise.
  • But this could rise to 1.4 million if all those with DC pensions blow their pots.
  • 850,000 people on the verge of retirement are particularly at risk of income shortfalls due to high concentration of wealth in DC savings and limited financial capability. 
  • Annuities should form part of a default retirement strategy. 

A major new report published by the International Longevity Centre-UK (ILC-UK) and sponsored by Aviva, provides the first detailed exploration of what certain choices made at the point of retirement today could mean for overall levels of retirement income over the next 30 years.

The report, “Here today, gone tomorrow” models the outcomes of four different approaches to using DC pension wealth: 1) annuitising, 2) blowing the pot on big ticket items, 3) putting everything into a savings account and 4) leaving the fund invested. It utilises data from the largest survey of the over 50s in England* and applies these approaches to different consumer segments aged 55-74. It finds that:

Even if all those approaching retirement were to annuitise, over half (1.1 million people) will not be able to secure an adequate income unless they use non-pension assets or receive additional benefits on top of the State Pension.

But in a scenario where the DC pot is used to buy big ticket items, an additional 350,000 people (1.4 million people in total) will not be able to secure an adequate income in retirement.

Putting everything in a savings account also risks people running out of money before they die. We project that for those years when people have savings to draw on, they achieve a replacement rate equivalent to two thirds of their pre-retirement income, but once their savings run out, they achieve an income of only half their pre-retirement income.

Given that people typically underestimate their life expectancy by upwards of four years, spending savings too early is a real possibility.

Leaving the fund invested also risks people running out of money before death as well as exposing individuals to substantial income volatility. Within a balanced fund of 60% bonds and 40% equities, we estimate that average annual income in retirement could range between £18,000 and £12,000 until the fund runs out.   

Not everyone will be equally affected by the choices they make. There are 850,000 individuals who are at high risk of seeing big income shortfalls from making particular decisions. Many of the individuals from this group have low levels of financial capability allied to a high concentration of financial wealth locked up in DC schemes.

For this group the report finds:

  • Blowing the pot would lead to a substantial fall in average projected replacement rates - from a replacement rate of almost 70% if they annuitise, to less than 40% if they blow the pot.
  • Putting everything into a savings account could result in substantial income falls at the end of life – from a replacement rate of over 60% when they have some savings to less than 40% when savings run out.
  • Keeping the fund invested could also result in substantial falls in income at the end of life for this group – from a replacement rate of over 70% when they can draw on the fund to less than 40% when the fund runs dry.

The report argues that “such income falls coming at the end of life could have disastrous implications resulting in individuals cutting back on expenditure just at a time when they may need it most – i.e. to maintain basic living standards as well as paying for long-term care”.

In response, the report argues that annuities must play a “key role in any future default strategy” given their clear benefits for those who will be highly reliant on their DC pots for retirement income. But the author’s argue that consumers must be appropriately forewarned that they will be auto-enrolled into the product and enrolment must not occur until the individual reaches State Pension age. 

On launching the report, ILC-UK Senior Research Fellow Ben Franklin said:

“While we do not advocate that everyone should take a particular course of action, our analysis clearly highlights the benefits of annuitising for those individuals who have a high concentration of wealth in DC savings. All other stylised choices risk significant falls in income during retirement. Annuities are generally misunderstood and the group who stand to lose the most from spending everything too early, also score relatively poorly on financial capability, making them particularly susceptible to poor decision making. Without the appropriate support including a new default strategy, these individuals could end up significantly worse-off in retirement”.

John Lawson, Head of Policy at Aviva added:

“6 April is just the start of the new regime and it’s important not to rush into any decisions.  We’d urge those starting to look into their retirement finances to take their time to shop around, take advice and consider all the options. We know people frequently underestimate their life expectancy and this research underlines how crucial it is to consider all your potential financial needs across the whole of your retirement, not just in the short term.”

  • Current policy not enough to secure adequate retirement incomes for many. 
  • Retirement planning difficult due to constant policy changes.
  • Uncertainty is compounded by twin threat of falling real incomes and low investment returns.

A new report published today by the International Longevity Centre-UK (ILC-UK) and sponsored by Prudential, calls upon the next Government to introduce a new independent Pensions Commission to rebuild consensus-based policy making in pensions and tackle the substantial challenge of insufficient incomes in retirement.

The report, “Consensus revisited” reveals that, despite a number of positive policy initiatives, many future savers are still unlikely to secure adequate retirement incomes as a consequence of economic and demographic headwinds:

The economic storm:

  • The UK’s economic recovery is founded on rising household spending, but in the absence of rising incomes, savings will fall and indebtedness will rise.
  • Household debt to income is predicted to rise above its pre-financial crisis peak in 2018, while the savings ratio is predicted to fall to its lowest level since 1997.
  • The country may also be entering a “new normal” period of low investment returns, with average annual returns on bonds and equities expected to be at least 50% smaller than they were in the 30 years prior to the financial crisis.

The demographic storm:

  • On average, in 2012, women left the workforce at 63, which means they will need to fund 26 years in retirement. Men will need to fund 21 years.
  • The average length of time spent in retirement has significantly increased over the last 30 years, by more than one third for men and just under one fifth for women.
  • Even with the Government’s planned changes to State Pension age, people will still require sufficient savings to fund up to a third of their adult lives in retirement (over 20 years).

In future, hopes for an adequate retirement income will hinge on people saving enough into defined contribution (DC) schemes, but evidence suggests this is not yet the case:

  • On average, employees contribute just 2.9% of their salary to a DC pot by comparison to 5.9% for members of defined benefit (DB) schemes[v].
  • The difference in the employer contribution is even starker – just over 6% for DC schemes but over 15% for DB schemes[vi].
  • Projections suggest that unless contributions into DC schemes rise, less than half of median earners will be able secure an adequate retirement income through Auto-Enrolment.

Given the context of policy change coupled with severe economic and demographic headwinds, the report argues for a new Pensions Commission to take a “holistic, non-partisan view of pensions policy” and make “well-informed decisions on the basis of strong evidence and widespread consensus”.

ILC-UK argue that the central aim of such a Commission should be to help savers secure income adequacy in retirement. The think tank argues that the commission should be given a remit to:

  1. define target outcomes for retirement savings and extending working lives.
  2. monitor progress against these targets.
  3. consult and ultimately decide on whether new policy reforms are needed.

The report argues that a commission be set up as soon as possible after the general election to help navigate the tricky road ahead, but that “in order to allow the current set of reforms to bed-in and to ensure at least short to medium term stability in pensions policy, the Commission should not set out any final proposals until 2017 at the earliest”.

The report also argues that the Commission must “carry sufficient weight politically to ensure that its findings and proposals are taken seriously” and recommends that the commission should report to the Secretary of State for Work and Pensions the Chancellor of the Exchequer and the Prime Minister.

Launching the report, Ben Franklin, Senior Research Fellow at ILC-UK said:
“A new Pensions Commission is urgently needed in order to look at the problem of retirement income adequacy in a holistic way – taking into account the political and economic realities of our time. The core goal of ensuring adequate retirement incomes based on the principle of consensus based policy making, is consistent with the original thrust of the Turner Commission a decade ago, and can be at the heart of a new coherent settlement on pensions policy in the UK."

Tim Fassam, Head of Public Affairs at Prudential added:
“Recent changes have expanded the number of people saving and provided a wider range of choices in retirement. While these are important improvements, most people are still not saving enough to provide the retirement they desire. Pension decisions are long-term, so stability and predictability are important in encouraging people to save more. At Prudential we believe the best way to achieve this is through consensus with savers, policymakers and industry working together.”

  • 7 in 10 people with DC pots aged over 55 would prefer pension to deliver guaranteed income for life.
  • Half want a guaranteed income that is protected against inflation
  • Yet 3 in 5 people with DC pots of this age have yet to make a plan.
  • And only half of those with DC pots say they understand what an annuity is.
  • Just 1 in 5 say they understand what the term marginal tax rate is.
  • 1 in 10 aged over 55 wrongly believes that to limit their tax burden they should withdraw everything from their pot as one big lump sum.

New research published today by the International Longevity Centre-UK (ILC-UK), finds that the majority of people approaching retirement want to use their pension pots to deliver a secure guaranteed income for life, with inflation protection being very important, but many may be too confused to know how to go about achieving this goal.

The new research, “Making the system fit for purpose” finds that consumers approaching retirement are ill-equipped for new pension freedoms. The research has been supported by a consortium of industry partners (EY, Just Retirement, Key Retirement, LV= and Partnership) and guided by pensions and retirement expert, Ros Altmann.

The research incorporates a representative survey of 5000 people aged 55-70 who are yet to retire or draw on their private pension wealth [1]. The survey found:

Guaranteed income seen as “most important”

  • Nearly 70% of all those with DC pension savings favoured using their pot to deliver a guaranteed income, particularly an income protected against inflation, while just 7% said that paying for big ticket items such as holidays or a car was most important, and 5% said paying off debt was the priority.

Older consumers are risk averse

  • Three quarters of people (75%) across the entire survey agreed with the statement “I would prefer a secure guaranteed income over an income that might rise or fall depending on financial markets”.
  • When asked what proportion of their pension fund they could afford to lose, the most common answer amongst those with DC pots was none (35%). Just 7% thought they could afford to lose 20% of their fund or more.

While consumers want income security many are confused about options

  • Only half those with a DC pension said they understood what an annuity is quite or very well.
  • Only 20% of those with DC pots understood what an enhanced annuity was.
  • And just 35% said they understood what income drawdown was.
  • This compares to 9 out of 10 people who said they understood what a mortgage is.
  • Women were consistently less financially aware than men on all measures and are therefore most at risk of confusion from the new pension freedoms

Compounding the problem of confusion, many are yet to make a plan

  • Across the entire survey just 4 in 10 had made a plan. Those closer to retirement were more likely to have made a plan but even amongst those who were less than 1 year from retirement, more than 4 in 10 had still not made one.
  • It is a similar story for those with DC pots, with 4 in 10 of those who are less than 1 year from retirement having not yet made a plan.

Lack of understanding could lead to artificially high tax burden

  • Only 1 in 5 people with a DC pot said they understood what marginal tax rate was.
  • When pressed on how to reduce their tax burden when withdrawing money from the pension pot, only half gave the correct answer that you should withdraw it in small amounts over a number of years. 1 in 10 wrongly thought that the best thing would be to withdraw as one big lump sum. 

On launching the report the Government’s Business Champion for older workers, Dr Ros Altmann said:
“It is clear from the research that there is an urgent need to help people understand more about how pensions work and what their options are when deciding how to make best use of their pension funds.  Even after decades of pension saving, many people have no understanding of the most important aspects of the pension system, which leaves them at risk of making poor decisions.  The opportunity of more freedom and choice in future has the potential to deliver better value from retirement savings, but much work still needs to be done to help savers understand their options.  Promoting take-up of the new Guidance service will be vital to help millions of men and even more women make the most of their hard-earned pension savings” 

Commenting on the results, ILC-UK Chief Executive, Baroness Sally Greengross said:
“These results underscore the significant challenges that lie ahead. By April 2015, we will need a fully functioning Guidance Guarantee which supports the high proportion of pension savers who have low levels of financial capability and who are confused about what to do in the face of these new freedoms. But Guidance alone will not be enough. An advice market that works for the many and not just the few is also needed – including mass market advice that meets the needs of those with limited to moderate net wealth. And critically, there is an urgent need to determine how we support those who fail to take Guidance or for those who take Guidance but are still liable to making poor decisions”.

97% of the fall in annuity rates down to increased longevity and low investment returns

Many lifetime annuities offer fair value for money according to new research by Jonquil Lowe of the True Potential Centre for the Public Understanding of Finance at The Open University Business School.

The report, which has been published today by the International Longevity Centre UK (ILC-UK) also argues that the protection against longevity risk may be poorly understood by consumers.

Falls in annuity rates over the past 25 years mean that an individual who wanted to start retirement with a nominal income of £10,000 would have needed a pension pot of £65,000 in 1990 but over £175,000 by 2013. This has led to a commonly held view that annuities are a bad investment, which overlooks the insurance value of annuities, particularly in the face of increasing longevity.

The research confirms that the major determinants of annuity rates are life expectancy and long-term interest rates. A simple linear regression of UK level annuity rates for a 65-year-old man against a benchmark 15-year gilt rate and cohort life expectancy using monthly data over the period 1991 to 2013 explains 97 per cent of the variation in the annuity rate.

The research considers whether annuity rates can be considered actuarially fair (i.e. if the expected discounted present value (EDPV) of the income equals the price paid).

Lowe finds that some annuity consumers are getting more than value for money (Money Worth Ratio (MWR) of more than 1). For most people buying the best value annuities (average of the top three rates), the MWR at all ages for women and at ages 55 to 70 for men is greater than 0.85. This is within the usual range for MWR therefore does not suggest an excessive mark-up by providers.

Even the worst annuity rates generally deliver value for money to women, with the exception of those with standard life expectancy aged 75. The worst annuity rates offer poor value for money to men however; the exceptions being men with higher-than-average life expectancy aged 55 or 60.

The results suggest consumer detriment to those male annuity purchasers who end up on the worst rates, but otherwise a product that is generally delivering value for money.

Lowe argues that annuities should be viewed through a consumption frame, focusing on what can be spent throughout the remaining life course, suggesting that if advisers and individuals are using an investment frame, the focus will be on rate of return and investment risk, but not longevity risk.

The report sets out the implications of this research for pre-retirement guidance and advice

  • Guidance or advice must help consumers understand the nature of longevity risk and how to protect against it
  • Guidance may be needed more than once given increasingly flexible retirements, and the fact that individuals will be free to draw their pension savings in as many tranches as they choose
  • Should government go further and mandate advice for DC members who are contemplating giving up aspects of their retirement security? Is there an inconsistency given those on DB schemes who wish to transfer to DC schemes from April 2015 will need to take advice?
  • Will guidance be sufficient? Guidance is non-specific; does not advocate a particular course of action; and does not recommend the purchase, sale or alteration of particular regulated products from particular providers. It seems likely that many, if not most, individuals approaching retirement would need to be directed to an authorised financial adviser for regulated advice, which begs the question whether guidance has a role at all beyond signposting to sources of authorised advice?

Author of the report and lecturer in Personal Finance at The Open University, Jonquil Lowe said: “This much maligned financial product should ideally still play a key role in most people’s retirement planning and in the free, impartial guidance for every retiree promised as part of the government’s pension liberalisation package. A fall in annuity rates associated with increasing life expectancy does not equate to a fall in value for money ; rather it represents a spreading of value over a longer period.”

David Sinclair, Director, International Longevity Centre – UK (ILC-UK) added: “The research dispels the argument that consumers should automatically shun annuities on the basis of value for money. But given the gap between the best and worst annuities in terms of value for money, it is vital that we continue to encourage and support retirees to shop around in order to get the best value annuities.”

The report points out that annuities may not be the right option for everyone. Other strategies and products may be more suitable for those with higher risk tolerance, greater resources and/or a desire to leave bequests. Those with low resources who can expect a high proportion of their income to come from their state pension and those with debts may still prefer to forego a pension income for a lump sum.

Ends

Notes:
In its 2014 Budget, the UK government announced that from April 2015 its citizens entering retirement will no longer be steered towards using their tax-advantaged pension savings to buy a lifetime annuity (a financial product where a lump sum is exchanged for an income for life), or indeed to securing an income at all. Instead retirees will have complete freedom to draw out their savings whenever and however they like, provided they have reached at least age 55.

*If the EDPV equals the price paid then its ratio to price will be 1. This ratio is commonly called the Money Worth Ratio (MWR) and is a standard way of evaluating annuities. In practice, the ratio will normally be less than 1 since the insurer incurs costs including normal profit. If there is a lack of effective competition, the insurer might also be making supernormal profit, in which case the MWR could be substantially less than 1.

The International Longevity Centre-UK is the leading think tank on longevity and demographic change. It is an independent, non-partisan think tank dedicated to addressing issues of longevity, ageing and population change. We develop ideas, undertake research and create a forum for debate.

The Open University Business School (OUBS) is a leader in modern flexible learning and the pioneer of teaching methods that enable people to change their life goals, studying at times and in places convenient to them.  The OUBS is one of a select group of schools worldwide accredited by the three leading international accrediting bodies – AACSB, AMBA, EQUIS – hallmarks of quality of teaching, learning materials and qualification impact. It is the only triple-accredited business school that specialises in flexible learning and is home to more than 24,000 MBA graduates in over 100 countries. Its MBA programme offers both residential schools and face-to-face and collaborative learning options.

For more information, please see its website at www.open.ac.uk/business-school

The True Potential Centre for the Public Understanding of Finance (PUFin) is a pioneering centre of excellence for research and teaching related to personal finance capability. Based at The Open University Business School, PUFin is generously supported by True Potential LLP.

Future generations of pensioners face a bleak future unless Government addresses the long term challenges of working age poverty, argues the International Longevity Centre – UK (ILC-UK).

In 2012/13, pensioner households were less likely to be on a low income than households with working age adults or households with children. This marks a stark contrast to 15 years ago when low incomes were far more prevalent across pension households than working age ones.

The figures are set out today by ILC-UK as it launches its second annual Factpack on ageing and demographic change (Mapping Demographic Change). The Factpack has been developed as part of the #populationpatterns series supported by the specialist insurer Partnership. ILC-UK highlight that whilst pensioner poverty has fallen substantially, the future may not be so rosy:

  • Whilst 1.6 million pensioners are experiencing relatively low incomes, pensioner poverty has fallen drastically over the last 15 years. In contrast, the proportion of households with working age adults and households with children living on low incomes has remained relatively stagnant. Relative poverty among working age adults without children has increased.
  • The number saving into a pension has dwindled over the past decade from over 5.5 million in 2000 to 2.5 million in 2012.
  • For the first time in two decades, a higher proportion of 18-24 year olds are economically inactive than 50-64 year olds.
  • The average age of a first time buyer without family assistance is now 33 compared with 30 in 2008. The number of households renting privately has increased by 63% since 2001.

Last week, the Office for Budget Responsibility (Fiscal Sustainability Report) predicted that by 2063, age related spending will equal 25.1% of GDP compared to 20.4% in 2018.

Speaking at the launch of the Factpack, Ben Franklin of ILC-UK said:
“We have made fantastic strides with tackling pensioner poverty over the last 15 years. But future generations may not be so fortunate. A combination of high house prices, low levels of saving and working age poverty presents significant challenges for tomorrow’s pensioners. These are long term problems which require action now. Last week’s Fiscal Sustainability Report highlighted the future potential cost of ageing. Taking action now to reduce working age poverty could contribute to long term savings by future Governments”.

Richard Willets, Director of Longevity at Partnership added:
“Alleviating pensioner poverty is something that we all agree should be a priority. However, rather than simply concentrating on those who are in retirement at the moment, we also need to think about the longer-term future. Those who are experiencing working age poverty at the minute are less likely to be in a position to save, buy their first home and start a pension– all steps which can put them on the road to a more comfortable retirement.  Even with positive moves such as auto-enrolment, we seriously need to consider how we can do more to solve this problem and avoid storing up issues for the future.”

One million pension savers face significant risks as a consequence of the new pension freedoms to be introduced in 2015 argues a new report. “Freedom and Choice in Pensions: Risks and Opportunities”, has been published today by the International Longevity Centre-UK (ILC-UK).

The report warns that unless a number of critical measures are put in place, pensioners could be worse off throughout retirement due to the new freedoms which will see the effective requirement to take an annuity abolished and pensioners able to take all their pension as cash.

The low interest rate environment, the lack of financial advice for the mass market and behavioural biases such as the underestimation of life expectancy, could result in individuals reacting to the new freedoms by blowing their pension pots on big ticket or high risk items. The report points out that individuals could unwittingly undertake high risk investment strategies including buy to let, or become the victim of scams that have appeared outside the regulatory perimeter.

To avoid this worst case scenario, and to ensure better financial resilience in retirement, the report makes a number of recommendations including:

  • The development of simplified advice models to cater for the mass market.
  • Effective innovation in products and services to meet changing income needs during retirement.
  • Increased consumer engagement well in advance of retirement.
  • One-off guidance to address behavioural biases.
  • A regulatory approach that welcomes innovation but remains wary of economic and behavioural drivers of consumer risk.

Launching the paper, ILC-UK Research Fellow Ben Franklin said:

“The new pension freedoms will completely shake-up the retirement income landscape. We need to make the most of the opportunities that the new flexibilities will offer, and minimise their risks.

On the one hand, new flexibilities offer the opportunity for individuals to maximise their investment strategies to meet their changing income needs during retirement. On the other hand, without appropriate guidance and advice, the economic climate and persistent behavioural biases threaten to induce poor decisions resulting in reduced financial resilience during retirement.

With so much to be done before the new framework is in place, the real threat to success lies in the extraordinarily tight timeframe for implementation – with less than a year to go before people can take advantage of the new freedoms.”

Freedom and choice in pensions: risks and opportunities is available to download.

For more information please contact: Ben Franklin or David Sinclair at ILC-UK ben.franklin@ilcuk.org.uk (02073400440 or 07543646992)

The Government should create a state-run “Equity Bank” to help low income older people generate extra income from their property argues a new report. “The UK Equity Bank” has been published today by the International Longevity Centre – UK (ILC-UK) and was produced by Professor Les Mayhew and David Smith of Cass Business School, part of City University London.

The authors propose that, after receiving the appropriate financial advice, an individual sells a portion of their home to the state in return for a guaranteed lifetime income. Upon death the property would be sold, the debt to the state paid and any remaining value passed to the person’s estate. The Bank would be carefully targeted at older retirees who own their own homes and live alone but are income poor.

The report points out that housing equity owned by the population aged 65+ is estimated to be worth around £1.4 trillion or, £122,000 per person on average (ELSA). In households with a deceased partner, home equity could be twice this average. Around 40,000 new people each year could benefit from the scheme.

The proposal responds to an influential 2013 House of Lords Committee report which argued that

“The Government should work with the financial services industry to ensure such mechanisms [for releasing housing equity] are available and to improve confidence in them”.

The paper will be launched at an event to be held in the House of Lords on 12th June chaired by Baroness Sally Greengross, Chief Executive of ILC-UK, the leading international think tank on longevity and demographic change.

The authors argue that the Equity Bank should be owned and maintained by central government. It is important that the financial benefits are not eroded by higher taxes or the withdrawal of benefits and the Government is in the best position to make sure this does not happen. A trusted state-run scheme as described in the paper could also benefit from economies of scale and relatively low borrowing and administration costs. Because it would be carefully targeted, it would sit along-side and not replace existing commercial products.

Launching the paper, Professor Les Mayhew said “The proposed recent pension reforms, whilst welcome, do not address the needs of existing pensioners whose incomes are fixed and therefore unaffected. Its main purpose would be to improve living standards in retirement, as well as making more money available for every day tasks and services such as help around the home, home maintenance, holidays, etc.  The proposal is aimed at a sizeable group of older home owners, perhaps as many as 400,000, who have relatively small incomes of, say, £15,000 per annum or less, consisting mainly of the state pension and limited additional sources."

Baroness Sally Greengross, Chief Executive of ILC-UK added: “The value stored in people’s homes could be used to provide greater income in old age and improve living standards. Whilst some people will chose to downsize, there is a large group of older people on low incomes for whom moving house would be impractical but for whom a higher income could significantly help improve their day to day life. Traditional equity release schemes may not work for this group of the population and new ideas, like the Equity Bank, deserve serious consideration from Government and the financial services industry.”

Professor Mayhew points out: “Even if only relatively small amounts were to be released each year, the Equity Bank proposal would generate macroeconomic as well as personal benefits to users. It would benefit local economies especially in places with disproportionate numbers of older people and income deprivation. Over time the Equity Bank would be self-financing but it is plausible that start up costs could be met from within existing welfare budgets.”


ILC-UK are currently planning our activities at the 2014 Political Party Conferences. We hope to run a series of events on topics as diverse as pensions, health, employment, care and communities as part of the main party conference fringe programme. If you are interested in talking to us about sponsoring a fringe event, please do get in touch with David Sinclair or Jessica Watson (jessicawatson@ilcuk.org.uk / davidsinclair@ilcuk.org.uk / 0207 340 0440).

We are also planning our 2014-2015 events programme. We organise 30+ events a year, from small discussion events, through to larger conferences. Our events always “sell out”, and often, very quickly. If you are interested in talking to us about sponsoring an event, please get in touch with David Sinclair or Lyndsey Mitchell at ILC-UK (events@ilcuk.org.uk / 0207 340 0440).

The International Longevity Centre-UK is the leading think tank on longevity and demographic change. It is an independent, non-partisan think tank dedicated to addressing issues of longevity, ageing and population change.

Responding to new ONS data on Health Inequalities published today, Ben Franklin, Senior Research Fellow at the International Longevity Centre - UK (ILC-UK) said:

“This data reveals that inequalities in health are most stark amongst the pre-retirement age bracket (ages 35-59).

Across the most deprived areas, 40.7% of people aged 50-54 rated their health as “not good” compared with just 11.6% of those living in the least deprived areas (see chart 1 below). Levels of deprivation then start to converge after retirement with increasingly similar proportions rating their health as “not good” after age 65 (see chart 2 below).

The data illustrates the importance of tackling health problems in the most deprived communities, way in advance of retirement. It also helps to explain why healthy life expectancy at 65 is so much lower across some local authorities than it is for others. While there are increasing pressures to work beyond “traditional” retirement age, inequalities in health are likely to mean that for many people living in deprived areas this will be highly challenging.”     

CHART 1 

 

CHART 2

On 10th February 2014, a new report from ILC-UK argued that increasing the state pension age without taking into account the 18 year difference in healthy life expectancy across the UK, risked disadvantaging groups of older people.

The report “Linking state pension age to longevity: Tackling the fairness challenge”, published as part of the Age UK Research Fellowship demonstrated that measures such as healthy life expectancy and disability-free life expectancy vary significantly by region and social class, and in consequence particular groups are more likely to be disadvantaged by a rise in the state pension age than others.


Notes

The ONS have today (14 February) published: Health deprivation divide widest for middle aged.

A new report from ILC-UK argues that increasing the state pension age without taking into account the 18 year difference in healthy life expectancy across the UK, risks disadvantaging groups of older people. 

The report “Linking state pension age to longevity: Tackling the fairness challenge”, published as part of the Age UK Research Fellowship demonstrates that measures such as healthy life expectancy and disability-free life expectancy vary significantly by region and social class, and in consequence particular groups are more likely to be disadvantaged by a rise in the state pension age than others.

  • While most people will live to state pension age and beyond, a large proportion are unlikely to reach state pension age in good health, particularly in some parts of the UK, with Glasgow City having a healthy life expectancy of just 46.7 years – a near 20 year deficit from the current SPA of 65.
  • Males in more disadvantaged areas and lower social classes are unlikely to reach state pension age free of disability, while those in the lowest social class have a disability-free life expectancy 13.4 years lower than males in the highest social class.
  • The additional benefits tied to the state pension age, such as the free bus pass, will on average, not be available to those from lower social classes until well beyond their healthy life expectancy.
  • Although life expectancy and disability-free life expectancy have increased over time for most groups evidence suggests that health gaps are continuing to widen. The difference in disability-free life expectancy between women born in the most and least deprived areas was 11.6 years in 2001-04. By 2007-10 it had increased to 13.4.  

The report also highlights how the disparity between life and healthy life expectancies may offset the perceived financial benefits of raising the state pension age:

  • Increasing state pension areas into ages where disability rates are higher, raises concerns about transferring spending from the state pension to disability and unemployment benefits.
  • Raising state pension age in line with life expectancy could result in increasing numbers of people leaving the workforce before reaching state pension age in order to care for friends and family. Currently it is a key reason why women aged over 50 leave the workforce.

The report makes a series of recommendations to policymakers, including to Government:

  • Five yearly reviews of state pension age, as detailed in the 2013 Pensions White Paper, should incorporate an examination of changes in healthy life expectancy and disability-free life expectancy as well as inequalities in these measures across different social classes and UK regions.
  • As state pension age increases, there must be continued investigation into the reasons for leaving work and retiring. This will help identify whether disability and poor health become a greater barrier to workforce participation as state pension age increases.
  • The recent increase in the proportion of employed men and women reporting a long term health problem or disability should be examined to explore what is driving these changes.
  • Health promotion strategies should target poorer social classes to ensure reduction rather than increases in health inequalities between classes.

Baroness Greengross, Chief Executive, ILC-UK, said:

“As we live longer lives it appears to be a natural move to raise the state pension age. Yet as this research shows, we need to be very careful to ensure that increasing the state pension age doesn’t just result in an increase in the numbers of people out of work and ineligible for state pension. This report highlights that the highest social class are likely to live 13.4 years longer disability-free life than the lowest. Central and local Government must concentrate greater effort on tacking the causes of inequalities which result in such huge divergences in life expectancy”.

Caroline Abrahams, Charity Director at Age UK, added:

"This research backs up what we've known for some time - that increasing the state pension age based purely on longevity will leave many people facing serious problems in later life. While it may seem reasonable to consider extending working lives as overall life expectancy increases, it will be especially tough on people with lower life expectancies – who are likely to be on lower incomes – who may end up with little or no time left in retirement to enjoy. Those who are unable to work longer due to ill health or caring responsibilities must be given the support they need, when they need it.

"The current Pensions Bill going through parliament should oblige government to take into account a range of factors before they consider raising the state pension age, such as the difference in healthy life expectancy and varying employment opportunities for continued working in later life.”

Ben Franklin, Research Fellow at ILC-UK and one of the report’s authors, said:

“This report demonstrates that raising the state pension age in line with life expectancy could have a number of unintended consequences. If increasing numbers of people leave the workforce before reaching state pension age – to care for loved ones or due to poor health – the economic and fiscal benefits of raising state pension age will be lost. And with such significant health inequalities across the UK, there is the very real possibility that the vast majority of people from some local authorities will fail to reach state pension age in good health. Improving the quality of life and not just the quantity of life is critical to ensuring that reforms to state pension age are successful in supporting longer working lives in a fair and equitable way.”

Paul Kitson, pensions partner at PwC, who will be hosting the launch event, said:

“As this research shows, not all pensioners are equal, the better off tend to live longer than those who are not so well off. While it is clear that state pension age needs to increase, the difference in healthy life expectancy between the different socio-economic groups raises questions over whether a one size fits all state pension age is the right answer.”

Notes

The report is available in the publications section of the ILC-UK website.

The report will be launched on the 10th February at the ‘Linking state pension age to longevity: Tackling the fairness challenge’ event being held at PwC, 1 Embankment Place, London. Minister for Pensions, Steve Webb MP will also be speaking on his plans for state pensions.

Age UK Research Fellowship

Age UK is funding a three year research fellowship at the ILC-UK. This fellowship allows us to undertake important research on ageing and longevity. Through the research fellowship, ILC-UK will undertake a number of pieces of policy and research work in agreement with Age UK. The ILC-UK is most appreciative of this opportunity given by Age UK.
 

Baroness Greengross said:

“Our society is in denial of the inevitability of ageing. We have put off the difficult decisions for far too long.

The Public Service and Demographic Change Committee argues that there has been a lack of vision and coherence in the ageing strategies of successive governments. This cannot continue.

It is fiscally vital that we get ageing right. Age-related spending in the UK is projected to rise from an annual cost of 21.3% to 26.3% of GDP between 2016/17 and 2061/62, equivalent to a rise of around £79bn in today’s money.

But addressing the cost of ageing is just the start of the challenge.

The report paints a picture of a health and care system which doesn’t work for today’s older population. Similarly our communities, housing and transport systems are ill equipped for the challenges ahead.

We must not be afraid to tell people that they are likely to need to work longer and that state pension ages may need to increase further as healthy life expectancy changes.

As individuals we will all need to take more responsibility for preventing ill health. Older people will, as the Committee highlights, need to use the value of their homes to partly fund their retirement.

But for individuals to plan for the long term, they need certainty about future policy direction. The lack of a strategic approach by Government undermines confidence in long term planning.

There is a role not just for Government and individuals, but also for the private sector. The financial services industry must respond better to the challenges of ageing. The market failure highlighted by the committee cannot continue. It is clear that parts of the industry want to serve this growing market. Government must create the right conditions for the financial services industry to thrive and deliver products and services to help us manage as we age.

This important and wide ranging report must kick start a new debate about age, and Government must not shy away from difficult decisions.

Now is the time for action. Tomorrow’s pensioners will not thank us for continuing to ignore this issue.”

Notes: The House of Lords Public Service and Demographic Change Committee, Ready for Ageing? will be published on 14th March 2013.

Today the International Longevity Centre-UK (ILC-UK) launches a pioneering snapshot of the life of older women in the UK and highlights how older women are still suffering from the legacy of a pension system designed historically around men and largely by men.
An intimate and revealing collection of essays penned by high profile authors entitled ‘Has the sisterhood forgotten older women?’ reveals the secret struggles and financial challenges for older women as they age.

Included within the 38 essays are contributions from Ros Altmann (Independent pensions expert and former Government policy adviser) and Anthony Thompson (Head of Public Affairs for Scottish Widows), both of whom highlight a ‘forgotten generation’ of older women who have found themselves in a pensions ‘black hole’.

Baroness Greengross, Chief Executive of the ILC-UK said:
“We are witnessing a generation of women who will be living out their later years in poverty through no fault of their own as a result of historic discrimination in the state and private pension arena. We need to make sure the next generation of women do not fall into the same trap.

While we welcome the proposed flat- rate state pension which should herald significant improvements for future generations of women, we need to make sure we repay the contribution older women made both in the public and private sphere and ensure they have financial security and dignity in later life.”

Ros Altmann, in her essay entitled ‘How older women lose out in the pensions arena’, urges women now to take responsibility for their own financial future and sets out her top tips for women to help provide for themselves in later life:

  • “Don't rely on a partner's pension - save for yourself.
  • If your partner is buying an annuity, make sure he knows the importance of selecting a joint life product that will keep paying to you after he dies.
  • Take your own financial planning advice, to help you assess your later life income prospects.
  • More women than men will need expensive social care so you may want to plan how you might pay for that if needed.”

In response to the essays and evidence submitted, ILC-UK will also be launching an Older Women’s Policy and Research Action Alliance to create a roadmap for future research and policy priorities.

The compendium is available to download from http://www.ilcuk.org.uk/index.php/publications/publication_details/has_the_sisterhood_forgotten_older_women The hashtag is #olderwomen

Responding to Aviva’s second Working Lives report, David Sinclair, Assistant Director of Policy and Communications at ILC-UK said:

“'Putting off’ retirement planning places young people at risk of living in poverty later in life. We must better plan for tomorrow, today.

Whilst many younger people are struggling to save, it is positive news that large numbers do not plan to opt out of automatic enrolment for pensions. Auto enrolment will result in millions more people saving for later life.

Society must do more to instill a savings culture in the young. Saving needs to become a social norm.

Government and the industry should work together to develop and promote a savings rule of thumb similar to the ‘5-a-day’ healthy eating message.”

Notes: Aviva’s latest working lives report is being published on 27th February. The report finds:

  • Britain’s workers remain undecided on pension saving - 37% of employees say they will opt out of automatic enrolment, and 28% are undecided.
  • Affordability is a key obstacle - almost half (45%) of employees who do not currently take up the pension they are offered say they don’t have the cash.
  • Only a third (37%) of employees are confident about their financial situation.
  • Two-thirds of employees (65%) say their key workplace concern is how their pay compares to the cost of living.
  • Nearly two-thirds (60%) of employees lack confidence in the UK economy.

Younger people and saving: ILC-UK’s 2011 report, Resuscitating Retirement Saving: How to Help Today’s Young People Plan for Later Life, produced with the support of Prudential, examined the financial and economic circumstances of young people today. It considered the role of behavioural economics in nudging young people towards saving for retirement.

With around 50 days to the introduction of the retail distribution review (RDR), the International Longevity Centre-UK (ILC-UK) has today published “Advice for all”, a new report which sets out practical solutions to address the advice gap post RDR.

Following the RDR there are concerns that fewer advisers will provide full advice to those with average pension pots, with some choosing instead to shift up the wealth spectrum.

“Advice for all” highlights the views industry and voluntary sector experts outlined at the Retirement Income Summit, hosted in June 2012 by ILC-UK and sponsored by Aviva and Partnership.

“Advice for all” calls for immediate action to reduce the risk of an advice gap which could result in poorer and less well advised pensioners. Of delegates surveyed at the start of the Summit, 78% believed the RDR will result in an advice gap for people with small pension pots.

The policy recommendations from the experts at the Summit include:

Greater transparency:

  • The industry should create a comprehensive league table of annuity rates and a directory of advisers.
  • Annuity providers must publish all annuity rates, regardless of whether they offer them just to current policyholders or open to all retirees.

Better information for the consumer:

  • Consumers should receive from their pension provider, the key details about their policy on just half a side of A4 paper.
  • All consumers should have the right to a short conversation about their retirement options.
  • Providers and regulators should work together to ensure consumers no longer receive volumes of compliant but ultimately overwhelming information.

A greater role for technology:

  • Annuity advisers and providers should explore greater uses for technology in delivering advised and non-advised services to help people understand their options at retirement and help them make an appropriate decision.

The report highlights that the difference between the best and worst annuity rates can be significant and too few people understand that they can shop around to get the best annuity rate through the ‘Open Market Option’.
“Advice for all” highlights four urgent challenges which must be addressed immediately in order to prevent consumer detriment:

  1. The advice gap: those with modest incomes may no longer have access to advice and could lose out on much needed retirement income.
  2. Too few savers are exercising the Open Market Option: retirees are losing out on retirement income through annuity providers’ failure to promote OMO properly.
  3. Information overload: more needs to be done to ensure customer information is developed from a consumer, rather than compliance, perspective.
  4. Lack of focus on the right type of annuity: there is a risk that consumers focus on the annuity rate they receive, to the exclusion of whether the type of annuity they are purchasing is right for them, which is critically important.

The report also highlights four longer term issues to be solved:

  1. Erosion of savings culture and industry trust: Confidence in savings is low due to the poor reputation of the financial services industry.
  2. Tackling opaque products and rates: Lack of transparency damages customers’ confidence in the industry and prevents consumer engagement with pensions. 
  3. Slow pension transfers: The mechanics of the pensions industry has made it difficult for retirees to get good annuity rates and accordingly erodes trust.
  4. Too many small pension pots: Fragmented pension pots do not engender engagement in the way a large pension pot does.

Delegates at the Retirement Income Summit were asked to vote on different policy proposals during the event:

  • 84% of delegates at the summit agreed that better consumer outcomes would be achieved if simplified advice was made workable.
  • 85% agreed that non-advised solutions combined with more financial education, transparent communication and appropriate ‘nudge’ techniques could help people get more from their pension pot.
  • 63% agreed that all pension customers approaching retirement should receive a one-page letter explaining that shopping around could provide them with more income.
  • 65% said the Government should consider some simple defaults for annuity purchase.
  • 79% of delegates said benchmark annuity rates for non-open market annuity providers should be published.
  • 83% said advised and non-advised services should be subject to the same rate transparency requirements.
  • 82% agreed that the Government and industry should develop detailed proposals to simplify the pensions transfer process further, whilst 95% said the industry should improve the flow of information from the current pension scheme to the member and their adviser and to release the monies to the new provider more easily and quickly.

Launching the report, Baroness Sally Greengross said “Our work on the Retail Distribution Review over the past year has highlighted a very real concern that many people will cease to access the advice they need. It is right that we raise professional standards in the advice sector. But we must all work harder to ensure that the poorest among us can maximise their income in retirement. Our report proposes solutions to the problems identified at the Retirement Income Summit. It is vital that industry alongside the Treasury and DWP, act on these ideas.”

Gregg McClymont MP, Shadow Pensions Minister, said: “I welcome the ILC-UK report. The urgent focus on the need to improve the value for money pensioners get when they turn their pension pot into an annual income is justified. For many people the current system just doesn't deliver value for money at the point of retirement".

Clive Bolton, Managing Director of Aviva's At Retirement business commented “Aviva wants to explore ways to help consumers get the best possible income in retirement. One of the unintended consequences of the Retail Distribution Review may be to limit access to advice at retirement, particularly for consumers with moderate savings who may not wish to pay a fee for full independent advice. By continuing to improve access to the Open Market Option and help retirees shop around for the right annuity we can make a very real difference to consumers’ income in retirement.”

Steve Groves, Chief Executive at Partnership “We are facing an annuity apartheid where there is a risk that only the wealthy will shop around for the best retirement income. We have been campaigning to ensure that Government, consumer groups and the industry talk to find solutions to help the majority (78% of annuities sold in the UK in in 2011 were for fund sizes under £40,000) get access to better retirement income, in the face of a potential advice gap with the introduction of the RDR. An annuity is for many of us, a once in a lifetime decision. For those with health or lifestyle conditions the difference between the best and worst rates can be up to 40%. At the same time, too few exercise or fully understand the benefits of exercising the Open Market Option and only 27% of people purchased an enhanced annuity while up to 50% could be eligible”.


ENDS

1) A full list of voting results is available in “Advice for All”. 123 experts attended the Retirement Income Summit and voted on a variety of options.


Notes

  • The report, Advice for All, will be available from 10.00 on 7th November on the ILC-UK website at http://www.ilcuk.org.uk/index.php/publications/publication_details/advice_for_all
  • In March 2012 the ILC-UK published a report entitled, The Retail Distribution Review and Small Pension Pots, which explored the impact the RDR would have on access to advice for those with small pension pots.
  • The ILC-UK recommended the Government and Financial Services Authority (FSA) should investigate the opportunities to mitigate the implications of RDR on financial advice for those with small pension pots, particularly for the 40% of people at retirement who would benefit from increased retirement income as they were eligible for an enhanced annuity for health and lifestyle reasons, and shopping around. 
  • It also urged the Government and FSA to provide a clear distinction between the provision of information and advice, and make clear to what extent providers are able to guide customers without it being deemed advice.
  • The report urged the government and FSA to review other topics, such as joining up the public policy agenda on financial advice and enabling saving. There was genuine concern that lack of cohesion and policy fragmentation created by silos between the FSA (leading on RDR), HM Treasury (the policy lead on financial advice) and DWP (leading on retirement outcomes for pensioners) will result in the poorest and least well-off pensioners receiving sub-optimal retirement outcomes.
  • Alongside the report, the ILC-UK published an open letter to Mark Hoban MP (Financial Secretary to the Treasury), Steve Webb MP (Minister for Pensions DWP), and Lord Adair Turner (Chairman of the FSA), calling for the Government and FSA to host a ‘retirement income summit’ to ensure the protection of the poorest pensioners. The letter was signed by senior Politicians across all parties, trade associations, providers, financial advisers and representative bodies.


Contact:

David Sinclair at ILC-UK on 02073400440 or 07531164886
Jim Boyd at Partnership on 020 7618 2730
Tom Wilson at Aviva on 07800 692053

Government should support the creation of new financial services products to better incentivise saving

The Government must develop a financial citizenship approach to long term saving argues the International Longevity Centre – UK (ILC-UK). A new think-piece, ‘Financial Citizenship: Rethinking the state’s role in enabling individuals to save’ supported by the Friends Provident Foundation, argues that the Government’s approach to long term savings has focused on responsibilities, but not rights.

The ILC-UK argue that the UK has a chronic under-saving problem, one which has been exacerbated by the financial crisis and economic downturn. The Think Tank states that there is an urgent need for policy-makers to address this problem.

Baroness Sally Greengross, Chief Executive of ILC-UK said
“We have a long term savings crisis in the UK. Far too few of us are saving enough for our long term needs. There is an important role for Government, the private sector and individuals.
We should move towards ‘matching’ contributions from the government, in place of tax relief, not least because incentives of this form are easier to target. Alongside this, the government could enable accounts allowing more liquid forms of long term saving for young people only, to help nurture a savings habit while recognising the particular circumstances of this life-stage.“

Dr Craig Berry, co-author of the report said
“At a basic level, citizenship implies that, in return for recognising our duties such as obeying the law and paying taxes, we have certain entitlements. We need a new approach to long term saving, one which takes on the principles of citizenship. A ‘financial citizenship’ framework would outline the respective responsibilities of individuals and the state regarding saving. While the current set of Government policies in place are not necessarily inconsistent with financial citizenship, nor are they adequate to support the vital need for more long term saving.”

Andrew Thompson, Grants Manager at the Friends Provident Foundation added
“The Foundation believes that building some savings can be a way of helping combat poverty and developing future personal autonomy - particularly for low-income groups - but is aware that UK society as a whole has moved away from savings as a source of wealth.
Our Trustees were therefore pleased to be able to support ILC-UK to conduct an exploration of what rights and responsibilities should exist in our ‘financialised’ society and the potential roles of the individual, the state and the private sector in moving us in a new direction on saving. We welcome the publication of their report, which raises some very important real-life issues, suggests some interesting solutions, and sets out what the implications for public policy would be. We very much look forward to following the debate that we hope will ensue.”

In the report, ILC-UK set out a series of principles of financial citizenship:

  • Duties must be matched by entitlements, which are not contingent upon private sector provision.
  • The financial system must be ‘democratised’.
  • Policies designed to support citizens to engage with the financial system should involve both universal and progressive (or means-tested) support.
  • Universal support should be designed in accordance with the life-stage implications for recipients.
  • Policies based on insights from behavioural economics are consistent with financial citizenship.
  • Financial citizens have a right to financial education.

ILC-UK urge the Government to consider supporting the creation of The Lifetime Bonus Savings Account (LBSA) developed by Tony Dolphin. Dolphin argues that the LBSA, in offering matching contributions for consistent saving targeted on low-to-middle income earners, represents a use of public money far more consistent with financial citizenship than existing spending to encourage saving.

Ends

About ILC-UK: The International Longevity Centre-UK is the leading think tank on longevity and demographic change. It is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change. We develop ideas, undertake research and create a forum for debate.

Notes:

  • 'Financial Citizenship: Rethinking the state’s role in enabling individuals to save’ has been supported by the Friends Provident Foundation
  • The think piece will be launched at an event chaired by Baroness Greengross on the afternoon of 24th April. Speakers at the event include:- Danielle Walker Palmour, Friends Provident Foundation and David Budworth of The Times
  • Advance copies of the report are available from David Sinclair at ILC-UK.

Cross party politicians and industry urge government action on retirement income

The impending regulatory environment for financial advice (RDR) may result in an ‘advice gap’ where the poorest and least well-off pensioners will fail to receive critical financial advice, argues the International Longevity Centre – UK (ILC-UK)

Alongside the publication of “The Retail Distribution Review and small pension pots”, by ILC-UK, with the support of pensions specialists, Partnership, a cross party group of MPs and senior representatives of the financial services industry, have urged the Government and FSA to act to ensure that the Retail Distribution Review does not widen the advice gap for people with small pension pots.

ILC-UK has today published an open letter to Mark Hoban MP (Financial Secretary to the Treasury), Steve Webb MP (Minister for Pensions, DWP) and Lord Adair Turner (Chair, FSA) calling on the Government and FSA to host a ‘retirement income summit’ to protect the poorest and least well-off pensioners. The letter has been signed by senior Conservative, Labour, and Liberal Democrat politicians.

The letter states - “We believe there is a significant risk that the impending regulatory environment for financial advice (RDR) may result in an ‘advice gap’ where the poorest and least well pensioners will fail to receive much needed financial advice. In turn they run the risk of having less income in retirement.  With one in six pensioners already living in poverty, these people need more income in retirement – not less!”

In “The Retail Distribution Review and small pension pots”, ILC-UK recommends that:

  • the government and the FSA should investigate in more detail the opportunities to mitigate the implications of RDR for financial advice for people with small pension pots, and in particular people who could benefit from an enhanced annuity by shopping around;
  • the government and the FSA should clarify the distinction between the provision of information and advice, and the extent to which providers are able to guide potential or existing customers without being deemed to give regulated advice;
  • the FSA restores a concern over the quantity of financial advice – as well as quality – to the heart of the RDR process;
  • the government establishes mechanisms to ‘join up’ the public policy agendas on financial advice and enabling saving;
  • the government continues to promote the open market option in the annuities market, and as such considers how to mitigate the potential impact of RDR changes on people’s ability to shop around for the best annuity deal; and
  • the FSA publishes open market option take-up by wealth cohort – providing greater transparency about which people actually exercise their choice to shop around for the best annuity at retirement. 


Baroness Sally Greengross, Chief Executive of ILC-UK said “The status quo in financial advice is not sustainable. Trust in financial advice in paramount – and this will only improve with a more transparent charging structure and stronger rules to ensure the independence of advice. But the unintended consequences of the RDR could reduce access to advice for people with small pension pots. We need to a greater emphasis on the quantity of advice as well as the quality of advice.”

Steve Groves, Chief Executive, Partnership added “The key changes brought by the RDR are to be welcomed. A transparent, professional advice market is in everyone’s interest. However they risk creating an“advice apartheid” unless there is greater clarity on what is information rather than advice and the processes to access financial products are simplified.”


KEY FACTS/EVIDENCE


NOTES

  • The open letter has been published at www.ilcuk.org.uk. It has been signed by Dame Anne Begg MP (Chair, Work and Pensions Select Committee), Clive Bolton (At Retirement Director, Aviva), Jonathan Evans MP (Chair, All Party Parliamentary Group on Insurance and Financial Services), Frank Field MP, Baroness Sally Greengross (ILC-UK Chief Executive), Steve Groves (Chief Executive, Partnership), Chris Hannant (Policy Director AIFA), Michael Lake CBE (ILC-UK Chairman & Former Chief Executive of Help the Aged), Lord Lipsey (President, Society of Later Life Advisers), Ivan Martin (Chair, Sesame), Lord John McFall (former Chair, Workplace Retirement Income Commission), Paul McMillan (Editor Money Marketing), Tom McPhail (Hargreaves Lansdown and Pensions Income Choice Association), Lord Newby, (Co-Chair, Liberal Democrat Treasury Parliamentary Party Committee), Joanne Segars (Chief Executive National Association of Pension Funds), Elliot Varnell (Milliman), Keith Boughton (Director, Insurance and Payments, Xafinity Paymaster).
  • “The Retail Distribution Review and small pension pots”, by ILC-UK has been published at www.ilcuk.org.uk today.
  • The Retail Distribution Review (RDR), will mean that financial advisers will have to charge clients directly for the provision of advice, rather than receive commission from product providers. The RDR also introduces new professional standards for financial advisers. The new regulatory regime will increase the cost of providing advice, which may mean that providing advice at affordable rates becomes prohibitive for many advisers.

OPEN LETTER
Mark Hoban MP – Financial Secretary to the Treasury
Steve Webb MP – Minister for Pensions, DWP
Lord Adair Turner – FSA

29th February 2012

Urgent call for a ‘retirement income summit’ to protect poorest and least well pensioners

We believe there is a significant risk that the impending regulatory environment for financial advice (RDR) may result in an ‘advice gap’ where the poorest and least well pensioners will fail to receive much needed financial advice. In turn they run the risk of having less income in retirement. With one in six pensioners already living in poverty, these people need more income in retirement – not less!
We request that you urgently convene a “retirement incomes summit” to address this issue, alongside other issues with the annuity market that are leading to poor outcomes in retirement for those with defined contribution pensions.

As you are aware 80% of pension pots are valued at £40,000 or less. Yet currently only one in three people shop around for the best retirement income – even though the difference between the best and worst income rates can be up to 40% or more for people with a health or lifestyle condition. Research shows that financial advisers can be critical in this process. Yet many may leave the market or will stop advising on unprofitable small pension fund business as the result of these new regulations.

We also believe that the move from final salary pensions, which guaranteed an income in retirement for life, to new pension structures, mean that far more people will be reaching retirement with a small pension fund who will have to make choices about their retirement income options without advice.

We must address core issues before the introduction of the RDR in the New Year – or risk an ‘advice apartheid’ between the wealthiest and poorest pensioners.

We accept there is major role for industry and the consumer and financial advice sector. But we urge Government to take a leadership role.

The “retirement incomes summit”, must address how we can:

  • ensure that an advice gap does not impact negatively on the ability of the poorest, and people in poor health, to maximise their retirement income?
  • simplify the process for those who choose to shop around
  • clarify the distinction between the provision of information and advice, and the extent to which providers are able to advise potential or existing customers without falling under the RDR regulatory regime and charging structure?
  • ensure that the quantity of financial advice – as well as quality – moves to the heart of the RDR process?
  • join up public policy agendas on financial advice, consumer engagement, and enabling saving?

The summit should also address how we can drive better outcomes at retirement by addressing wider issues around the functioning of the annuities market and the appropriate support for members of defined contribution schemes when turning their pension pot into an income.

We support the principles underpinning RDR. We also believe that the required outputs, which we have set out above, can be achieved without any changes to that regime.

However, if we cannot achieve those much needed changes to processes and communications ahead of RDR, there may be serious consumer detriment to our poorest and least well pensioners.

The International Longevity Centre – UK has today published a policy brief which explores these issues in more detail.

Yours sincerely

Dame Anne Begg MP (Chair, Work and Pensions Select Committee), Clive Bolton (At Retirement Director, Aviva), Jonathan Evans MP (Chair, All Party Parliamentary Group on Insurance and Financial Services), Frank Field MP, Baroness Sally Greengross (ILC-UK Chief Executive), Steve Groves (Chief Executive, Partnership), Chris Hannant (Policy Director AIFA), Michael Lake CBE (ILC-UK Chairman & Former Chief Executive of Help the Aged), Lord Lipsey (President, Society of Later Life Advisers), Ivan Martin (Chair, Sesame), Lord John McFall (former Chair, Workplace Retirement Income Commission), Paul McMillan (Editor Money Marketing), Tom McPhail (Hargreaves Lansdown and Pensions Income Choice Association), Lord Newby, (Co-Chair, Liberal Democrat Treasury Parliamentary Party Committee), Joanne Segars (Chief Executive National Association of Pension Funds), Elliot Varnell (Milliman), Keith Boughton (Director, Insurance and Payments, Xafinity Paymaster).

 

A response to the Open Letter above was received on 5th March 2012. To view the response, click here.

 

Ignorance of pensions is preventing extended working lives, ILC-UK survey reveals

It is too often assumed that retirement is a one-off event, rather than a process. Yet there is increasing evidence that we are moving towards a process of ‘gradual retirement’, a concept associated with a wide range of opportunities that may be available to older workers, including downshifting within their current employment, moving into new forms of flexible and part-time work, and self-employment.

Crucially, a process of gradual retirement is far more likely to result in later retirements. However, it is clear that many barriers to gradual retirement remain. A survey commissioned by the International Longevity Centre-UK (ILC-UK), and supported by Aviva, reveals that:

  1. 40 per cent of people would consider delaying their retirement if they could defer the state pension in return for higher payments later – yet 59 per cent are unaware that this option is already available.
     
  2. 42 per cent of people would consider delaying their retirement if they could combine income from an occupational pension and their current job – yet 66 per cent are unaware that this option is already available to many employees.
     
  3. 46 per cent of people would consider delaying their retirement if their employer offered greater support for reducing their working hours, or flexible working arrangements.
     
  4. A lower proportion of people, 36 per cent, would consider delaying their retirement if the state pension age is increased further than already planned. However, this proportion rises to 53 per cent among part-time workers, underlining the importance of ‘gradual retirement’.
     
  5. 55 per cent of people would support a system whereby individuals could access part of their state pension early, in return for a lower pension when they retire in full.
     
  6. A large majority of people – 67 per cent – do not support the idea that people above state pension age, yet still in employment, should continue to pay National Insurance contributions.

The results are presented and evaluated in full in ILC-UK’s new report Gradual Retirement and Pensions Policy, which is also published with the support of Aviva. The report recommends that the government should:

  1. Make the positive case for extending working lives much more strongly. At present, many people feel that raising the state pension age is simply about deficit reduction. Many older people recognise the benefits of staying in work for longer, but nevertheless perceive the government’s current strategy as a threat to their hard-earned entitlements.
     
  2. Consider the introduction of a ‘graduated state pension’. ILC-UK’s survey reveals strong support for a system whereby individuals wanting to downshift could access part of their state pension – even if they would therefore receive lower pension payments when they retire in full.
     
  3. Better promote aspects of the pensions system that encourage longer working lives. This applies, in particular, to state pension deferral. It seems many people would stay in work if they could defer their state pension, but are unaware that this option already exists.

Baroness Sally Greengross, Chief-Executive at ILC-UK said “We know that financial circumstances play a huge part in retirement decisions, and so the pensions system is clearly having an impact on the path to retirement that is chosen by individuals. But retirement should be seen as a process, not an event. We must do whatever we can to increase the options available to workers entering later life, so they are able to continue contributing to the economy in a sustainable way.”

Clive Bolton, ‘At Retirement’ Director at Aviva said: The government’s move to abolish the default retirement age means that fewer people will be forced to give up work.   As a result, we expect to see people working until later in life and having a wider array of retirement choices.  However, the availability of employment and the flexibility offered will rely on the economic climate of the time, so some people might find it harder than others to keep working in later life.

“Our own Real Retirement Report recently showed that most people see the final ten years before they retire as the main opportunity to build up their pension pots, yet 40 per cent of over-55s experience a significant career disruption over this period. As a result we are seeing the rise of downshifting whereby people continue to be economically active in retirement and gain the financial and social benefits of employment. It is therefore crucial that retirees are supported in choosing how and when they finish their working lives .”

Contact:
Dr Craig Berry (report author) at ILC-UK on 02073400440. Or email craigberry@ilcuk.org.uk

END

Notes to Editor:

  1. Gradual Retirement and Pensions Policy will be available on the ILC-UK website on 22 November 2011. Advanced copies are available for the media.

  2. The production of Gradual Retirement and Pensions Policy has been supported by Aviva.

  3. The International Longevity Centre-UK is the leading think tank on longevity and demographic change. It is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change. We develop ideas, undertake research and create a forum for debate. The ILC-UK is a registered charity (no. 1080496) incorporated with limited liability in England and Wales (company no. 3798902).

  4. Dr Craig Berry is a Senior Researcher at ILC-UK and the author of The Future of Retirement (2010), Resuscitating Retirement Saving: How to Help Today’s Young People Plan for Later Life (2011) and Financial Citizenship: The State’s Role in Enabling Individuals to Save (forthcoming). He also lectures on economic policy at the University of Warwick. He worked previously as a Policy Advisor on Older People and State Pensions at HM Treasury, and completed his PhD at the University of Sheffield in 2008.


Young people and pensions: a savings culture is urgently needed, argues International Longevity Centre – UK

‘Putting off’ retirement planning is placing young people at risk of a financially unsustainable future and society is failing to instil a savings culture in the young, says a new report, by the International Longevity Centre-UK (ILC-UK). The think tank argues that because the transition between adolescence and adulthood is generally increasing, we need a greater commitment to encouraging young people to think about and plan for retirement.

The report Resuscitating Retirement Saving: How to Help Today’s Young People Plan for Later Life, produced with the support of Prudential, examines the financial and economic circumstances of young people today, and considers the role of behavioural economics in nudging young people towards saving for retirement.

The report notes the trends which are likely to impact on long term saving, including increased longevity, fiscal problems caused by population ageing, an increase in flexible working, and growing care needs. In the future, most people will be enrolled in money purchase (defined contribution) rather than final salary pension schemes, requiring individuals to bear more responsibility for their retirement income. The report also points out that buying a house will become more difficult – arguing that an obsession with investment in housing may be inhibiting saving for a pension.

The report recommends:

  • The development and promotion of a savings rule of thumb similar to the ‘5-a-day’ healthy eating message.
  • Better promotion of existing incentives to save.
  • Taking the opportunity provided by online financial services to make pension saving more accessible and as easy as online banking.
  • The development of a ‘Plan B’ in case young people ‘opt out’ of occupational pensions saving after the introduction of auto-enrolment in 2012.
  • The introduction of a compulsory choice between savings options – making young people exercise the power they seem to demand.
  • Government should consider the introduction of a graduated state pension to reflect changing expectations around retirement.

Dr Craig Berry, Senior Researcher at ILC-UK and author of the report said:

“Planning for retirement may be an alien concept for many young people, but delayed transitions to adulthood in terms of owning a home, establishing a career and starting a family mean that young people need to start saving for a pension now. Crucially, however, government policy to encourage saving must be informed by generational perspective. If we are to get young people to save we must consider their financial and economic circumstances, alongside their behavioural traits.”

Minister of State for Pensions Steve Webb said:

“We have to get young people engaged in pensions as they will live longer than us and will have to take more responsibility for saving for their retirement.”

“Automatic enrolment will make a dramatic difference, giving millions the opportunity to save in a work based scheme for the first time ever, with nearly a quarter of those eligible aged 22 to 30. And NEST’s investment approach will help them see their money growing and encourage them to keep saving.”

Rob Devey, Chief Executive of Prudential UK and Europe, said:

“It is never too early to start preparing for retirement and with auto enrolment we have a once in a generation opportunity to create a culture where pension saving is the norm for young people. If supported by engaging communication and efforts to boost financial capability we can begin to help this generation of savers secure the retirement they desire.”

Contact:
Email: rebeccataylor@ilcuk.org.uk


Notes to Editor:

1. Resuscitating Retirement Saving: How to Help Today’s Young People Plan for Later Life will be available on the ILC-UK website on 8th June 2011. Advance copies are available for the media.

2. The production of Resuscitating Retirement Saving has been supported by Prudential

3. The International Longevity Centre-UK is the leading think tank on longevity and demographic change. It is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change. We develop ideas, undertake research and create a forum for debate. The ILC-UK is a registered charity (no. 1080496) incorporated with limited liability in England and Wales (company no. 3798902).

 

Responding to news stories that the Government intends to reduce Pension Tax Relief, David Sinclair, Head of Policy and Research at the International Longevity Centre – UK, said:

“On the surface, proposals to curb tax relief on pensions for the richest in society seem fair. Over half of pension tax relief goes to higher rate taxpayers and a quarter goes to just 1% of the population with the highest income.

It would however be extremely dangerous if this money was taken completely out of the pension system. If we are to reduce pensioner poverty, we must better incentivise people to save and reduce the reliance on means tested support. The Government should invest savings into a developing decent universal basic state pension. If Government doesn’t invest in encouraging young people to save today, they will inevitably be paying more to pick up the tab for pensioner poverty in the future”

ILC-UK yesterday published a report, commissioned by poverty charity, Elizabeth Finn Care, which found that nearly two-thirds of people (65%) think that job creation should take precedence over reducing government debt. The report urged the Government to consider intergenerational fairness as it makes its decisions about spending cuts over the next week. The full results of the survey are available here.

The nationally representative telephone survey of 1000 UK adults aged 16+ was conducted between 1st and 3rd October 2010 by GfK.

Intergenerational Fairness and the Spending Review 2010 was published on Wednesday 13th October 2010 by the International Longevity Centre-UK, with the support of Elizabeth Finn Care. It analyses the potential impact of the spending review in the context of intergenerational fairness and sets there challenges for the Government ahead of the announcements on 20th October.

The three principles for maintaining intergenerational fairness set out in the report are:

  1. The Spending Review should impact fairly across different generations.
  2. The Spending Review should not exacerbate the causes of poverty in later life.
  3. The Spending Review should not undermine the drivers of increased longevity.

 

In light of proposals to increase the State Pension Age faster than currently planned, and the likely abolition the Default Retirement Age, a new discussion paper by the International Longevity Centre-UK sets out why people retire when they do and examines how this may change in the future.

The paper finds that

  • The meaning of retirement was originally bound up with the receipt of a pension, but most people do not retire at State Pension Age;
  • Good pensions coverage generally increases the likelihood of early retirement, and vice versa. Other things being equal, low-paid/low-skilled workers retire later due to financial compulsion;
  • Over the long-term, defined contribution pension schemes are likely to encourage later retirements, in part due to their inherent incentive structure, but also because they tend to be less generous that defined benefit schemes; and
  • Many older workers seem to favour a gradual transition from work to retirement. Such arrangements could help people to cope with care responsibilities.


ILC-UK recommends that, if working lives are to be extended, and the government needs to give more attention to:

  • Preventative healthcare throughout the life-course;
  • Job quality for older workers;
  • The potential of ‘gradual retirement’, including encouraging employers to offer downshifting options to staff approaching retirement at all levels;
  • Simplifying the pensions system and improving the provision of advice; and
  • The support offered to older people with caring responsibilities.


Dr Craig Berry, author of the report and Senior Researcher at ILC-UK said “Proposals to increase the State Pension Age and abolish the Default Retirement Age will have an impact on individual retirement decisions. They will not automatically lead to longer working lives, and Government must not develop its policies in this area without looking at the reasons people retire when they do. The Government needs to consider how it can best incentivise and support us to work longer in sustainable ways. The introduction of policies to encourage ‘gradual retirement’ have to be part of this picture”

To download the report, click here: The Future of Retirement

 

The Minister was taking part in a debate organised jointly by the International Longevity Centre-UK and the Actuarial Profession entitled Pensions reform after the election: how the consensus can be maintained. The event was sponsored by Aviva.

The debate, which featured a number of eminent speakers, examined the future of pensions provision in Britain, both private and state, and examined how the challenge of providing for future generations can be met.

The Minister said: “At the start of a new government, the time is right to look at the big picture. Pensions policy has suffered from the curse of incrementalism in the past coherent systems have been tinkered with to the extent that they no longer function properly.”

He continued: “The state pension must be the foundation on which all other pensions policy is based and we will help ensure this by restoring the link between pensions and earnings.”

Charles Cowling, chair of the Actuarial Profession’s pension committee said: “It is heartening to hear a pensions minister look to the long term. Commitments towards simplification and giving people greater choice, including scrapping the mandatory retirement age, are welcome. The time for a frank and open debate on pensions is now. It cannot wait any longer. And the Actuarial Profession will play its part in ensuring that this debate is informed with fact and shapes a sustainable and fair pensions system.”

Baroness Sally Greengross, Chief Executive of the International Longevity Centre- UK added: “A whole new approach is needed if we are to deliver a future pension regime which is fair, sustainable and helps tackle pensioner poverty. It was clear from the debate that there is significant consensus on the objectives of future pensions reform. Pension reform is too important to become a political football.”

 

New statistics on private pension contributions, published last week by the Office of National Statistics reveal that contributions to private pensions have gone into reverse (2008) after increasing for many years. ONS also reviewed last week that the old age dependency ratio (1) will continue to rise over the next twenty years.(2)

The International Longevity Centre-UK (ILC-UK) has responded to these new statistics by publishing a new policy paper 'Where next for pension reform? How can we encourage people to save?'(3) which, amongst other things calls on a future Government to:

  • Support employers in providing advice to employees
  • Work with all stakeholders together to attack the continuing problem of pensioner poverty.
  • Explore the case for extending matched saving either as an addition to or replacement for tax relief (up to a certain limit).
  • Take steps to deliver a ‘decent’ universal state pension
  • Ensure individuals have access to impartial and accurate information and advice.
  • Create a Permanent Independent Pensions Commission
  • Abolish the Default Retirement Age so as to remove a barrier to older people working longer.
  • Support a regulatory environment which supports successful decumulation
  • Deliver pension reform which works as a solution for all generations and does not result in intergenerational unfairness.


Baroness Greengross said “Over the last ten years we have, with some success, begun to build a consensus on the way forward for pension reform. It is important that this consensus continues into the new Parliament. Further pension reform is not going to be easy. But if we are to continue with progress to tackle pensioner poverty then it is a consensus worth seeking”.


Notes

This Policy paper was produced by ILC-UK following a dinner debate supported by Aviva.

  1. The dependency ratio measures the proportion of people above state pension age to those below.
     
  2. Pension Trends (Chapter 2 Population Change; and Chapter 8 Pension Contributions) were published on 9th April 2010. See http://www.statistics.gov.uk/pensiontrends/ for more detail.
     
  3. 'Where next for pension reform? How can we encourage people to save? has been produced by ILC-UK following a dinner debate, held on 22nd February and sponsored by Aviva to discuss pension reform and saving. It is available here.


ILC-UK are organising a debate on Pensions reform after the election: can consensus be maintained? on Tuesday 15th June at the Actuarial Institute. Further details are available from events@ilcuk.org.uk

 

Responding to ‘Pension Trends - Inequalities and poverty in retirement’, and the ’An Anatomy of Economic Inequality in the UK: Report of the National Equality Panel’ David Sinclair, Head of Policy and Research at the International Longevity Centre - UK said:

On the one hand the National Statistics report reveals that the position of retired households has improved over the last 30 years and that there has been a downward trend in the number of pensioners living in poverty since the mid-1990s. However with two million people still with incomes below 60% of median income (after housing costs), this is not the time to start celebrating.

National statistics reveal that between 1977 and 2007/08, the wealthiest increased their share of total household income whilst the poorest saw their share fall. In other words, the gap between rich and poorer older pensioners has grown.

We can’t look at these statistics in isolation from today’s National Equality Panel report which found that whilst progress has been made in tackling poverty, deep-seated and systematic differences in economic outcomes remain between and particularly within social groups. The report highlights that many inequalities accumulate across the life cycle and are often passed on to the next generation.

What these two reports highlight is that if we are to solve these major challenges of poverty and inequality we can’t pitch one generation against the next. The poorest tend to live shorter lives and spend longer in ill health. We must therefore address income and health inequalities early if we are to have an impact on pensioner poverty later in life. Extra investment in prevention is vital, but so is ensuring that all have the opportunity to be economically active.

The recent economic downturn has challenged the job prospects of both young and old. We need greater support for young people to enter the job market and for older people to stay in active employment, if they choose to do so. For older people, flexible working and allowing people to continue to work past 65 years of age is critical if we are to achieve this goal.

At the same time, while the recent pension reforms will make a difference, we are still not making enough provision for our retirement. And we must ensure that those on the lowest incomes are claiming the benefits they are entitled to. Some of the poorest pensioners are missing out on £5 billion of unclaimed benefits.

Poverty and inequality is too important an issue to become a political football. The challenges are difficult and we have seen significant progress over recent years. However, we must work together to identify and implement policy solutions which will ensure people aren’t disadvantaged simply because of their age, gender, race, social class or birthplace.

ENDS

“Pension Trends - Inequalities and poverty in retirement” is available at http://www.statistics.gov.uk/pensiontrends/
National Equality Panel report is available at: http://www.equalities.gov.uk/national_equality_panel.aspx

TOP STORIES

In May this year, ILC-UK conducted a study mission to Japan supported by our sister organisation, ILC-Japan, and funded by the Daiwa Anglo-Japanese Foundation and the Great Britain Sasakawa Foundation.

Two complementary research reports published today by ILC-UK have both found that physical and mental illness at younger ages can have a significant impact on employment trajectories in later life.

A new report from the International Longevity Centre (ILC-UK), ‘Public health in Europe during the austerity years’, has identified early warning signs that austerity will affect health outcomes for decades to come.

Innovative new programme revealed at ILC-UK’s flagship “Future of Ageing” conference London

Older people are spending an increasing number of retirement years living in poor health, according to new research from the International Longevity Centre-UK (ILC-UK).

The International Longevity Centre - UK hosts an annual full day conference to bring together representatives from Government, business, academia and civil society to discuss the Future of Ageing.

CATEGORIES: