The uncertainty of the pandemic has complicated many people’s plans for Retirement.
The ups and downs experienced over the past 18 months have meant a lot of people have dipped into their savings to cover shortfalls in income or have had increased living expenses as a result of pressures like supporting family members.
The over-50’s have been hit hard as part of this trend, and figures from the Centre for Ageing Better suggest that the number of over-50s in work has declined by 181,000 since the start of the pandemic. Meanwhile, analysis from Rest Less found more than 540,000 people in the age group were living on a reduced income on the furlough scheme as it came to a close at the start of autumn.
While the situation has seen some older people who can afford to support themselves dive straight into early retirement rather than search for another role, for many, it means planning for more years in the workplace. But who is affected, and can anything be done about it?
Changing horizons for retirement
Recent research conducted by Relaxed Retirement found that one in eight people over the age of 50 is planning to delay retirement in the wake of the pandemic. That’s the equivalent of 3 million people. And while the average delay to retirement plans is three years, many (12% of those delaying retirement) now expect more than seven years’ extra wait.
The reason for this is a perfect storm in family finance caused by the fallout from Covid. The decrease in the amount held in savings and investments is one of the key issues affecting retirement plans. More than one in three (36%) over-50s ended up spending some of their savings in the past 18 months, with £2,000 on average used to cover essential spending.
In addition to covering their own financial shortfall during the pandemic, over-50s also often had family members who may have needed additional support. This economic pressure on furloughed or financially squeezed adult children has led to one in six (17%) over-50s dipping into their savings to help younger generations stay afloat.
And troublingly, those in their 60s saw a bigger dip in their finances, losing an additional £276 on average compared to those in their 50s (£2,188 vs £1,912). With less time before retirement left to build savings back, for many, there’s a real need to explore other options.
Tapping into assets
One potential approach that can help pave the way to being able to retire on time is to look at tapping into assets. While those aged 50-plus are experiencing challenging times, one upside is continued high levels of property ownership. Currently, 58% of 55 to 64-year-olds own their dwelling outright and this increases to 76% among 65 to 74-year-olds, Statista reports.
Currently, Relaxed Retirement’s research suggests that 10% of over-50’s would consider using Equity Release – or lifetime mortgages as they are often called – to access value from their house if it meant they could retire earlier. But the popularity of Equity Release could further increase as those who have been forced to change their retirement plans look to free up wealth held in the form of bricks and mortar.
As well as offsetting holes in savings from the pandemic, the additional cash could help ease concerns around the cost of care in the future and the resultant pressure on family finances among younger generations. Equity Release might also be used to improve or adapt property to allow for the more complex needs of later life. This can enable people to stay in their family home, where they may have happy memories, rather than be having to contemplate the upheaval of moving to a smaller retirement property.
Taking out Equity Release is a decision to be weighed up carefully, with input from specialist advisers and family members. It won’t be the right solution for everyone who has had to dip into their savings in the past 18 months. However, for some it does have the potential to help them to keep their retirement plans on track and enable a better quality of life.