Over-50s workers are taking a gamble on their future plans, with the majority failing to actively save for retirement and 13% hoping for a lottery win to fund their lifestyle.
Just one in five over-50s workers are seriously saving for retirement, according to research by Aviva, with a significant number relying on external factors to finance their later life.
Which? looks at how prepared over-50s are for retirement and what steps you should take to safeguard your future income.
Over-50s gamble on retirement
Over 2 million workers over 50 are yet to put a retirement plan in place, the research from Aviva found.
Around 42% of over-50s workers have not started to calculate how much they need to save to afford a comfortable retirement and 41% are unaware of how much they will actually need.
Just 22% of over-50s workers say they have started to take their pension savings seriously.
Instead, individuals are relying on external factors which are out of their control to bankroll their retirement.
Around 24% of workers hoped an inheritance would fund their twilight years. Worryingly, a staggering 1.3 million over-50s workers (13%) are depending on a lottery win to retire comfortably.
A quarter of workers over 50 are relying on making a profit from downsizing to a smaller home or relocating to a different area. The average amount of equity already or expected to be released from a property is £57,140, Aviva found – making the family home one of the biggest assets most people own. But this strategy leaves workers at the mercy of the housing market, where prices can stagnate or even fall.
Despite data from the Office for National Statistics (ONS) indicating that over half of adults in the UK are confident their retirement income will give them the standard of living they hope for, Aviva’s research raises alarm.
- Find out more: saving for retirement at different ages.
What are over-50s spending on?
For workers in the UK, income levels tend to peak at the age of 51, Aviva found. This is broadly supported by data from the ONS, showing employees now aged 65 hit their peak earning potential at the age of 53.
Just over a third of older workers (34%) began to save up more during this period of peak earnings, while 12% have started a private pension scheme and another 12% plan to contribute more to an existing workplace pension.
But a large proportion are giving priority to other financial demands. One fifth (21%) of over-50s workers say that they intend to spend on big one-off purchases such as a new kitchen, car or building an extension, while around 20% put spending on everyday living and enjoying themselves first.
For some workers, this could be less a choice than a necessity – one in three older workers reported being unable to save after paying for everyday living costs.
With CPI inflation rising to a five year high, more than half (54%) of over-50s workers agree that the rising cost of living poses the biggest threat to their standard of living within the next five years.
The gender savings gap
Women were found to be less likely to prioritise saving over other financial demands. Roughly 27% of female workers over 50 are yet to have taken a serious approach to pension saving compared to 19% of men. Almost half of female workers have not calculated how much they need for retired life, compared to 36% of men.
Scottish Widows’ annual Women Retirement Report also found that women are less likely to be saving adequately. On average women were found to have saved £64,000 for retirement compared to £125,000 for men.
Key reasons for the difference include salaries for women not meeting the minimum auto-enrolment contribution threshold and being disproportionately affected by loss through divorce.
- Find out more: perks and benefits of being retired.
How do I kick start my retirement planning?
While saving for retirement can seem daunting, starting early and planning well are both key. Aviva found that those who were prepared to face retirement had begun planning in their 30s and 40s.
Find out the approaches other people have already taken for retirement and their plans for the future in our short video.