A new report from the Equity Release Council (the Council) and Key – Pension / Property Paradox: revisiting the retirement confidence gap – has investigated trends in older homeowners’ retirement financial plans and confidence levels over the past 12 months.
It reveals the proportion of homeowners aged 55+ worried about running out of money in retirement has increased to 34%, up from 27% a year earlier. These concerns are rising fastest among men, up nine percentage points over the last year to 32%. However, women who are still working remain the most anxious (48%) – the highest proportion of any group in the study.
The research also highlights that women feel they have less power over choosing when they can retire. 41% of women still working are confident they will be able to afford to choose when they retire, compared to a majority (56%) of men still working.
The report said that low retirement confidence levels can be partly attributed to the wide gender pension savings gap. Office for National Statistics (ONS) data shows the value of women’s pension savings can be up to 40% less than men.
Meanwhile, the coronavirus pandemic has dented many people’s hopes of achieving a comfortable retirement. 29% of women still working over the age of 55 expect to have a less comfortable retirement than their parents. This compares to 21% of men aged 55+ who are yet to retire.
As concerns about health are weighing heavily in the current climate, the research found that 48% of older homeowners are worried about falling ill and having to pay for care, up from 39% a year earlier. 24% are worried about having to sell their home, up from 18% last year. Women are most affected by this concern (26% vs. 21% of men).
The report found that the disruption to the UK labour market caused by coronavirus has acutely impacted older workers, as a record 90,000 people aged 50+ were made redundant between June and September 2020. Steep income falls will hit older workers’ retirement savings as they focus on paying for daily living costs.
The research shows this is already starting to happen, as 12% of women over the age of 55 have stopped saving altogether as a result of the pandemic, as have 8% of men.
However, the findings also show that, despite greater concerns about the ability to fund retirement and lower pension savings, women who own their own home are less likely than men to consider using later life lending products – such as lifetime or retirement mortgages – as an alternative source of money to support their income in retirement (23% vs 31%).
David Burrowes, chairman of the Equity Release Council, said: “This research reveals that older women in work are experiencing an acute crisis in confidence about achieving a comfortable retirement.
“Women are faced with a disproportionately bigger challenge in building a nest egg for later life. This is driven by the perfect storm of longer life expectancies and gender differences in earnings, savings and working patterns. Yet despite this, women are also less likely than men to consider later life lending products when facing a retirement funding shortfall. A more holistic approach to financial planning is needed now more than ever, as an over-reliance on pensions alone will make it harder to maintain living standards in later life.
“Looking ahead, there are important steps we can take to help strengthen people’s confidence ahead of retirement. Encouraging them to consider a range of funding options could improve their prospects of achieving greater financial security. The scale of untapped potential in the UK’s property wealth is substantial and has an important role to play – but it is vital that consumers are supported to make decisions that will suit their needs in both the short- and long-term.”
Will Hale, CEO at Key, added: “While retirement is generally viewed as something to look forward to – an opportunity to take a well-deserved break after a busy working life – today’s report suggests that for many people stopping work is a scary prospect fraught with financial concerns. Will I run out of money? How will I pay for care? How can I build up a big enough nest egg?
“All these concerns and more are being exacerbated by the impact of the current pandemic which has seen older consumers lose their jobs, stop saving and dip into the funds they have already set aside. Women who are disproportionately represented in hard-hit industries like hospitality and retail are already finding that their lower average salaries mean they are more financially vulnerable in retirement but both genders have been hit and are concerned about the future.
“Now more than ever it is important to take a holistic look at retirement finances and ensure that you are using all your assets to their full potential. For most over-55s, their home is worth more than their workplace pension so it is vital that this potential source of financial support in retirement is fully considered.”