The 40s mid-life pensions crisis
While some people suffer an identity crisis in their 40s, new research from specialist financial services group Just Retirement suggests that those in their 40s experience a 'mid-life pensions crisis'.
In a survey of 1,200 people over the age of 40, those in their early 40s were the most pessimistic in their retirement outlook. Only one in 10 felt that their retirement planning would mean they would be comfortable in retirement and just 13% of over-40s said they were looking forward to retirement.
One third of those aged 40-45 wish they had started sorting out their retirement plans sooner, 18% saying that they find pension planning confusing and 10% dreading making irreversible choices around retirement.
Although those in their early 40s appear to suffer a 'mid-life pensions crisis', they gradually become more optimistic as they age and transition from what the survey refers to as their 'fearful forties' to their 'secure sixties'.
Those in their early 60s are more likely to believe they will be comfortable in retirement (32%), more likely to look forward to retirement (30%) and significantly less likely to dread making retirement choices (4%).
Stephen Lowe, group communications director at Just Retirement says: “When people reach their 40th birthday, the idea that they will eventually retire really hits home and the challenge of retirement planning means that they can suffer a 'mid-life pensions crisis”.
This appears to be characterised by confusion, lack of confidence in their retirement provision and concerns about what might happen.
“However - as with the more traditional mid-life crisis - as they age and start to take positive steps to meet these challenges, they start to worry less about their retirement until by their early 60s almost a third are looking forward to this new stage in life.”
Take proactive steps
That said, the figures still suggest that less than half of people in their early 60s (43%) believe they will be comfortable in retirement which is hugely concerning.
“Taking proactive steps such as speaking to an independent financial adviser, enrolling into a workplace pension scheme and making choices which will ensure you have a guaranteed income in retirement are vital.
“No one wants to reach traditional retirement age and find that they are still as worried and confused as they were 20 years before.”
There is currently a debate around when people should have access to the government's guaranteed guidance service, Pension Wise. 50 is an age that is being proposed, but this research suggests that some people may value having access to this guidance in their 40s.
Commenting on the survey results, Martin Tilley, director of technical services at Dentons Pension Management, says: “The standout figure for me is that there are around 30% of people across all age ranges who wish they had started pension funding earlier.
“This must be the key message to get across to the younger generation now to prevent similar statistics in 10-15 years' time.
“I would hope that independent advice and the information and education available online now is well ahead of where it was 20 years ago, so this might help the younger generation, as will the publicity of auto enrolment and other initiatives such as the Lifetime Isa.”
This story was originally written for our sister magazine, Money Observer.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.