Over-55s Unclear On How Much They Need For Retirement

Over-55s are struggling in the run-up to retirement with just two out of five (38%) clear on how much money they will need when they stop work, new research from behavioural finance experts, Oxford Risk shows.

The study with more than 1,000 over-55s found 27% are not on track to retire at their target age while 35% do not believe they will be able to afford the retirement they want. Around a third who were surveyed (32%) – the equivalent of more than seven million people - say they are dissatisfied with their current financial situation.

Women aged 55-plus are more likely to be worried about their retirement finances, the research found. Around 31% of women say they are not on track to retire at their target age compared with 22% of men and 40% of women do not believe they will be able to afford to do what they want in retirement compared with 29% of men.

The study shows over-55s recognise the importance of having income sources aside from the State Pension – just 3% disagreed with the importance of having additional sources of income. Around 86% agreed other sources of income were important while 11% were undecided.

Dr Greg Davies, Head of Behavioural Finance at Oxford Risk said:
“Millions of over-55s are struggling to get to grips with retirement planning and are not clear on how much money they will need and whether they can afford to fund their retirement.

“In general, they recognise the value of building up other savings and the vast majority are not relying solely on the State Pension, but there is still a lot of confusion over retirement planning, and clear evidence of a gender gap.

“Financial advisers and wealth managers can help the over-55s to get on track for retirement and devise a plan to meet their objectives. Since Pension Freedoms in 2015, the complexity of retirement planning has been marked. As a result, we’re seeing a growing demand for new technologies in combination with behavioural approaches that financial advisers and wealth managers can use to support improved outcomes for retirees.”

Guides available on Oxford Risk’s website for financial advisers and wealth managers outline how using technology and behavioural science enables firms to tailor services more efficiently whilst communicating with clients more effectively.

The firm emphasises that individual measures of risk tolerance, risk capacity, behavioural capacity, knowledge and experience, and sustainability preferences need to be combined into a holistic suitable risk level. Measuring each component in isolation risks missing the overall intention to produce better outcomes for investors throughout their investment journey.

The company, which builds software to help wealth managers and other financial services companies assist their clients in making the best financial decisions in the face of complexity, uncertainty, and behavioural biases, has developed proprietary algorithms which rank products, communications, and interventions for their suitability for each client at a particular time.