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A million pensioners financially 'reliant on others'

Press release: 06/07/2016

  • One in 10 retirees are ‘Reliant on Others’ – dependant on friends or family to help them financially
  • Next generation of pensioners three times as likely to be in this position
  • Many existing pensioners, and people approaching retirement, also turning to their friends for advice on their finances

More than a million pensioners (1) are financially reliant on friends and family, with the next generation even more stretched, according to the latest research from LV=.

LV=’s annual State of Retirement report, released today, shows that one in 10 (11%) pensioners are reliant to some degree on friends and family for financial assistance. (2) While this suggests the vast majority are able to remain financially independent in retirement, worryingly, those due to retire within the next 10 years are almost three times as likely to be in this situation (27%).

At the same time, there is a general trend of people turning to their nearest and dearest for advice about their finances, rather than professionals. Six in 10 (60%) existing pensioners took financial advice from non-professional sources – such as friends and family – and three quarters (72%) of those approaching retirement plan to do the same. Only a quarter (25%) of over 50s have taken, or plan to take, professional advice about their retirement, despite the fact that this could help them get more from their money.

Reforms to the pension system in recent years have increased choice and made it even more important people are able to access this support. More than four in 10 (45%) people approaching retirement say the reforms are too difficult to understand without professional help.

Cost is often the main barrier to advice but new, affordable solutions, like LV=’s Retirement Wizard, are helping make regulated advice accessible to the mass-market. These developments will be crucial if those approaching retirement, who otherwise might find themselves reliant on friends and family for money, are to get the help they need to make sure their savings work hard.

Those who do take regulated advice certainly see the value in it, as over the last two years the number of those approaching or at retirement who felt financial advice was ‘worth the money’ has nearly doubled (3).

John Perks, Managing Director of Retirement Solutions at LV=, said: “A significant minority of pensioners rely on loved ones to help them financially during retirement and those approaching retirement seem to be in an even worse situation. Yet equally worrying is that people are also far more likely to take financial advice about retirement from friends than from a professional. Given the increasingly complex choices consumers have to face about their pensions, and with the economic impact of leaving the European Union still unknown, we believe it’s never been more important consumers have access to professional advice at retirement.”

The research is part of LV=’s annual State of Retirement study, which this year outlines nine common ‘states’– or typical financial situations – retirees fall into, including the one in 10 who are ‘Reliant on Others’. The remaining eight states are:

  • Property Pensioners (22% of over 65s and likely to increase in future)

These retirees rely on some value from their property to help fund their retirement – primarily through downsizing, relocating or equity release – and, for some, this is their primary asset.

  • Grey-Collar Workers (8% of over 65s and likely to increase in future)

This segment describes those who choose to carry on working after typical retirement age (65) either through choice or necessity. The good news is that for most this is a choice, with the majority (87%) of those working at retirement age doing so because they want to.

  • Overwhelmed (19% of over 65s and future change unclear)

This group relates to those confused by the number of options available to them, undoubtedly influenced by the range of choices opened up by the recent pension freedoms.

  • Second Homeowners (7% of over 65s and future change unclear)

These people have second properties either as an investment or means of income, allowing them to be able to live comfortably in retirement.

  • Falling Short (24% of over 65s and likely to increase in future)

These retirees worry that their savings and/or pension won't last their full retirement or allow them to have a comfortable lifestyle in their later years.

  • Pension Investors (9% of over 65s and likely to decrease in future)

Having left work, this segment uses some of their new free time to make active decisions about their pension resources and reinvest to continue to grow their reserves.

  • State Pensioners (43% of over 65s and likely to decrease in future)

This is the most common of the states of retirement, where the state pension provides the majority of retirement income, often supplemented by personal pensions. This segment is also the most likely to worry about having enough money in their retirement years or look to other sources for income, such as part time work.

  • Defined and Refined (24% of over 65s and likely to decrease in future)

These people are retired on a healthy defined benefit pension, which provides a fixed income for life, allowing them to have a high standard of living in retirement.

The full report looks at these ‘States of Retirement’ in detail, as well as more detail on why states will be more or less common among the next generation of retirees.

Social Media Element

Notes to editors

The State of Retirement research was conducted by Opinium Research 10-14 March 2016 and 20-22 May 2016. The total sample size was 1,523 UK adults over 50s. The research was conducted online and results have been weighted to a nationally representative criteria.

The Nine States of Retirement

FCA behavioural segmentation of UK consumers currently breaks down retirees into two groups – essentially the well-off (Retired with Resources) and those who are struggling (Retired on a Budget). This year, LV=’s State of Retirement research was used expand on this work by broadening out these segments; an exercise aimed at delivering greater insight and understanding of the typical scenarios that people in the UK find themselves when hitting retirement. Further details available in the full report.

(1) According to the Pensions Policy Institute there are 12,312,000 people at retirement age or older (link). 10% of this is 1.2 million.

(2) Of all those retired, 10% relied regularly, from time to time, or on rare occasions for financial assistance from friends and family. This figure rose to 28% for those within 10 years of retirement.

(3) In 2014, 12% of over 50s felt that advice was worth paying for. In 2016 this had risen to 20%, nearly twice that of two years prior.