Financial MOTs needed throughout later life

‘We are woefully underprepared’ for our ageing society. This was the conclusion of last year’s House of Lords Select Committee on Public Service and Demographic Change report, Ready for Ageing? Medical advances may have helped many of us to live until our 80s and 90s but financial services have yet to catch up.

Older people are key contributors to the UK economy. People aged 65 and over spend in excess of £121 billion a year and Age UK estimates that their economic contribution totals £61 billion a year. In addition, people aged 85 and over represent the fastest growing segment of the population. But along with increasing longevity, have come technological changes; greater individual responsibility; and financial uncertainty.

This uncertainty is why Age UK decided to hold a Financial Services Commission to examine how the financial resilience of older people can be improved. We ran a series of summit events to engage senior leaders from the financial services industry, the government, consumer groups and regulators to discuss the key issues facing older people and money, and to develop potential solutions.

The Financial Resilience in Later Life report, launched today, sets out Age UK’s roadmap for industry, Government and regulators to improve the financial resilience of our ageing society. The report’s conclusions are especially timely given the changes announced in the budget to liberalise the private pensions market earlier this year. Age UK broadly welcomed these radical changes, but also emphasise how additional measures are needed to ensure the reforms work effectively for everyone.

Among the report’s recommendations are calls for ‘u-shaped’ products and services that support our longer, more complex lives with the largest financial outgoings for many coming at the start of retirement and towards the end of life. To ensure that product innovation works in the interests of consumers, the report calls for financial services to be more honest and transparent about products, particularly around investment returns. It’s equally important that any associated guidance or advice highlights the potential longevity of retirement and spending patterns over time.

In addition, after 2015, a cross-government-commissioned review into the long-term savings and pensions market is recommended to develop a more coherent policy for annuities, pensions, tax relief and NISAs. This would also serve as an opportunity to review the impact of the reforms on industry behaviour and assess whether the reforms protect consumer interests.

The pensions liberalisation announced in April’s budget make the Commission’s calls for regular ‘financial MOTs’ in later life particularly pertinent. This calls for a holistic joined up retirement guidance journey throughout later life, so people have regular financial checks ups approaching and during retirement. Some movement towards this is already taking place. The Department for Business, Innovation and Skills has recently piloted a Mid-life Career Review, the new guidance guarantee starts next April and we’d like to see the development of a ‘care navigator’. If these three touch points could be cohesively linked, it could genuinely strengthen everyone’s financial resilience in later life.

The government, society and individuals all need to play their part in preparing for and maintaining a decent standard of living in later life. The financial services industry has a pivotal role to play in engaging with individuals and delivering solutions that enable people to build up and maintain their financial resilience throughout later life. You can download a full copy of the report from the Age UK website.

Vivienne Man is Policy Adviser at Age UK