More older people say they are worried about money when they retire as the State Pension Age rises and the cost of living increases, says Aviva.
More over 65s are still working compared to six years ago as the pension age rises, but many are not able to plug the gap between deferred access to the state pension and retirement, according to a new report.
The Aviva survey, conducted earlier this year among people aged 65 to 74, shows a marked increase in the number of people over 65 who remain in the workforce compared to 2016, and a fall in the number drawing their state pension. Whereas 92% of over 65s were already retired in 2016, only 79% are now.
Aviva says this is due to increases in the State Pension Age, which was raised from 65 to 66 between December 2018 and October 2020 – and is set to rise further in future. In 2016, 96% of people in this age range said the State Pension accounted for some of their income, compared with 71% now. This represents a 25% decrease in the proportion of people in this age bracket receiving part of their income from the state pension.
As the State Pension Age continues to rise, Aviva says over 65s will need to plan to find alternative sources of income. Its survey results show the gap is only partially being plugged by people continuing to work for longer. There has only been a small rise in those saying wages or other earned income constitute a portion of their overall income – 23% versus 18% in 2016. For a fifth of people in this age bracket, an income gap left by State Pension deferral has not been replaced by wages and this group is growing as the number of people over 65 continues to rise. People between 65 and 74 now account for almost 19% of the UK population, compared with 16% a decade ago.
The survey also shows that, for those over 65, money worries about retirement figure more prominently than six years ago. In 2016 only 1% of over 65 said they were worried about running out of money in retirement, while another 1% said they wouldn’t have enough money to fulfil plans and dreams such as travelling. Six years on, the proportion has risen substantially to 11% for both.
One asset that has grown for this age group, however, is the amount of capital they hold in property. Sixty-five to 74-year-olds have, on average, lived in their current house for 24 years, which, Aviva says, means they have benefitted from nearly all the property price increases that have occurred since the late 1990s, when the current property boom began. Nearly two thirds of them own their property outright.
Matt McGill, Managing Director of Aviva Equity Release, said: “In the years since we first carried out this research, significant events have impacted the way people feel about the economy, their futures and their retirement plans. Many of these events, such as the cost-of-living crisis, the pandemic and Brexit, have impacted people of all ages, but the increase in the State Pension Age has added new challenges specifically for the over 65s.
“While for some the income gap can be plugged by wages, our survey shows there’s still a significant shortfall for around a fifth of the over 65s, which has translated into them worrying more about having enough money in retirement.
“Despite this, the UK housing market has been on a steady upward trend since many current retirees bought their homes. Yet in most cases, the scale of the growth of people’s capital goes unrecognised – less than half (42%) of those we surveyed felt their home was worth more than their savings and investments. This suggests people may have accumulated more wealth in this asset than they realise. As cost-of-living pressures ramp up, the equity in people’s homes could become increasingly important when looking at ways to plan for a comfortable retirement.”