PENSION SAVERS STRUGGLE WITH ‘RETIREMENT ENVY’

  • Six out of 10 working over-45s savers envy pensioner lifestyles
  • Just one in 10 believe they will be better off
  • Retired household incomes hit seven year high of £21,100*

Pension savers are struggling with retirement envy as they look at the standards of living and lifestyles of people who are already retired, new research** from MetLife shows.

Its study among working over-45s shows 61% are jealous to some extent of the financial security enjoyed by older generations including final salary schemes and better returns on investments while they were saving for retirement.

The envy means just one in 10 expect to have a higher standard of living when they stop work while 29% expect to have a significantly lower standard of living and 29% believe they will be slightly worse off. MetLife’s report The Exposed Generation: Creating a More Certain Pathway to Retirement sets out the challenge facing over-45s as they come to terms with the opportunities and challenges of new pension freedoms.

Government data shows there are some grounds for retirement envy –  median retired household incomes at £21,100 are now £1,800 higher in real terms than at the depths of the recession in 2007/08 and have risen over the seven years while median income for working households is still below the 2007/08 level.

However the MetLife research*** shows that envy can cut both ways. Around one in five (20%) pensioners envy the pension freedoms and flexibility that younger generations have.

MetLife warns that the pension industry needs to offer more innovative solutions to help savers make the most of increased flexibility on how they use pension savings. It has launched new flexible Guaranteed Drawdown and a Guaranteed ISA to provide greater certainty and flexibility.

Dominic Grinstead, Managing Director, MetLife UK said: “Retirement envy is a real concern if savers simply switch off from pension saving and believe they will never achieve what older generations have.

“The fact that just one in 10 think they will be better off than current pensioners highlights the need to really grasp the opportunities of pension freedom which deliver flexibility over retirement savings and put people in control of their own money.

“Financial education and advice can play a major role but the industry itself has to offer retirement income solutions which provide certainty over income and flexibility over capital as well as helping people to save.”

The research shows savers aged 45 to 54 are the most likely to be envious and the closer people get to retirement the envy drops. However 51% of those aged 55 to 64 suffer some retirement envy and 45% of working over-65s are envious.

MetLife’s new Retirement Portfolio is the first product specifically designed for pension freedoms and provides daily lock-ins of investment gains while enabling savers to start, stop and restart their income**** to suit their personal needs.

Customers can choose from a range of investments to build a personalised retirement plan suited to the levels of risk they are willing to take while having the choice of a valuable guaranteed level of income for life or guaranteed capital sum.

The Secure Income Option offers the choice of guaranteed income now, and an enhanced income deferral rate of 5% for those seeking the certainty of a higher future income.  MetLife calculates guaranteed income for life based on the value of a customer’s initial investment and their age when selecting the option. The guarantees also include valuable guaranteed death benefits.

Guarantee charges start from 0.6% on the Secure Income Option and 0.3% on the Secure Capital Option. Investments through MetLife’s Active Asset Allocation invest in funds that have a total expense ratio of 0.55% per annum. Minimum investments are £30,000 into the Retirement Portfolio and £15,000 into the ISA Portfolio.