The Pensions Policy Institute | Comment


A New Year’s resolution to start thinking about later life now


Lauren Wilkinson


Lauren Wilkinson is a senior policy researcher at the Pensions Policy Institute (PPI)


As someone who is 40 years away from the state pension age, even one who works in the pensions industry, retirement seems an awfully long way off. Even for those approaching retirement much more imminently, many haven’t given much thought to how they will spend their later life. Among those aged 50 to 59, only around half (53%) say they have clear hopes or ambitions for their later life, 22% say they have some ideas but have not thought about it that much, and the remaining quarter (25%) have not really thought about it all. Yet it is becoming increasingly important to plan ahead as retirement trajecto- ries become more varied and decisions about how to access and use pension savings more complex.


Planning for later life requires people to draw on a broad range of skills to make complex decisions about unpredictable futures. In general, engage- ment with and understanding of pensions and other aspects of retirement decisions are low. People may also put off discussing or making decisions about pensions and later life because they fear ageing and associated health declines, or because they have low levels of personal sav- ings, which can make the prospect even more daunting. However, it is vital that people make plans ahead of time for how they would like to spend their later life, how they might want to approach the various unpredictable challenges that later life can involve, and how their levels of pension savings might match up with these expectations. It’s never too early to start to give thought to how you might want to spend your later life, and the


earlier we do, the more time we have to make changes to our savings behaviour to increase the likelihood of being able to achieve these expecta- tions, if current contribution rates are falling short. People are likely to need replacement rates of between two thirds and three quarters of work- ing life income in order to replicate working life living standards. But this can be hard for people to visualise, particularly when they are many years away from retirement. The Pension and Lifetime Savings Association’s (PLSA) Retire- ment Living Standards provide a helpful tool for people to develop a better understanding of what different levels of pension savings are likely to provide in terms of lifestyle. However, for these to be most effective, we need to get people think- ing about the kind of retirement lifestyle they want earlier on, while there is changes to be made.


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Other large financial decisions we take during our life, from buying a house, a car or even book- ing that special one-off family holiday are nor- mally supported by research, extensive planning and discussion with peers and family. Retirement saving does not seem to follow this standard behaviour, whether this is due to the fact retire- ment seems a long way off or the fact we do not want to face our own mortality or the fact we are desperately trying to battle with the cost of day to day living, there has to be a change in this mind set. The earlier we plan for the future the better potential outcomes there could be. With a new decade just around the corner, we could all stand to benefit from looking further to the future and making plans for later life now.


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Issue 89 | December-January 2020 | portfolio institutional | 15


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