Pension plans have had to take a step back in the past year or so as the coronavirus ravages the economy. Sadly, a new study from Legal & General has detailed that many over 50s fear retirement is simply out of the question.
In mid-March, Legal & General produced a report on how the pandemic ‘has polarized the retirement opportunity gap for over 50 years, and recently Spring, the UK-based residential property buyer, analyzed the results.
“The long-term results of the impact of Covid on the economy are becoming more evident every day, but the topic of discussion right now is retirement,” the organization found.
“The discussion is not so much when it is possible but now if it is possible at all, since 2.6 million people over 50 believe that they will have to work indefinitely due to the financial difficulties experienced during the pandemic.
“The worst unemployment level in the UK last year was 5.1%, the highest since 2015. As the rate declines (latest reports suggest unemployment is currently 4.9%), many of them were preparing to live outside the labor force. are still feeling the effects.
“According to the latest research from Legal & General, more than 1.4 million people aged 50 and over need to adjust their retirement plans to account for the financial losses they have suffered over the past year.
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“The adjustments seem to vary from three additional years of work to indefinite work. Many people over the age of 50 have suffered a loss of around £ 500 per month, or more than 20% of the average monthly household income of £ 2,084.
“With such a significant impact on pensions and the minimum age at which people can access their private pensions dropping from 55 to 58 in 2028, any notion of retirement seems to be a criterion that is so often far removed.
“Even though the final stage of the lockdown and pandemic is in sight with the lifting of restrictions and the roll-out of vaccinations at an impressive rate, the long-term effects will be felt for years to come, as so many over 50 years experience it.
“The promise of a happy and restful retirement and the prospect of working indefinitely is becoming too likely.”
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Additional research from the Royal London also shows older retirement savers are keen to embrace freedom and travel in a post-pandemic world, but their financial reality is about to hold them back.
Royal London recently surveyed 1,000 UK respondents aged 55 and over and analysis of the results detailed “a staggering” 64 percent of those over 55 plan (or hope) to travel more once the pandemic is over.
However, when asked about the factors that kept them from ‘making their dreams come true’, 36.6% of respondents said that a lack of money put their plans on hold.
Next come professional commitments (16%) and family commitments (12.4%).
In light of these difficulties, Spring acknowledged that positive retirement plans may now seem like a distant memory, but there are a “number of ways” people can get their plans back on track by freeing up money. silver.
Spring then broke down some of the options available to savers:
Many retirees have probably racked up debt over the past year, but Spring explained how to best manage it in the future: “” One of the most difficult things to deal with with debt is the sporadic nature of the payments. necessary, which means any planning you do will likely be out of date by the end of the week, ”he said.
“Being able to consolidate all of your debt into one manageable sum allows you to focus all of your energy and debt management in one place.
“While you have more control over your finances, you may end up paying more over time. As with anything related to your retirement, you should speak to a financial expert before making any major decisions.
Mortgages for life
Demand for release of shares has increased in recent months and, according to Moneyfacts.co.uk analysis, the choice of lifetime mortgages has reached an all-time high as lenders increase options available to borrowers looking for a plan to release equity, exceeding 500 for the first time. checked in.
Life mortgages detailed in the spring might be an option for retirees, but they called for caution: “” Life mortgages are a type of equity release product that can help those nearing retirement to free up money in their house, ”the company said.
“It’s a very similar process to remortgaging, but it’s only available to those over 55.
“The potential problem that could arise with a lifetime mortgage – just like other stock release products aimed at the older generation – is that the burden of paying it off falls on your family when you die.
Freedom of pension
Spring concluded by examining how the pension freedom rules could allow instant access to cash, but limitations may apply, he said: “Since 2015, the way people could access their pension has experienced a major change. Annuities have become a thing of the past and having control over your pension has become more common.
“This change means that (if you wish) you can withdraw your entire pension at once (although this results in a tax bill that can often reach up to 40 percent), allowing people to use their pension as they see fit. While this can be a fairly immediate way to access money, the concept of accessing all of your money can be overwhelming and risky. discussing any financial movement with an expert is crucial. “
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