Are We Heading For The Death Of Wealth?

Britain is heading inexorably towards a financial crisis which will dwarf anything we have seen so far in this recession – with generations of accumulated and inherited wealth being lost forever, fears Dick Lumsden.
By: Dick Lumsden
 
Jan. 13, 2010 - PRLog -- The indications are that potentially 75% of the UK workforce – some 19 million people – are financially under-prepared to survive possibly decades of retirement, and many of them will face the prospect of selling property and other assets to make ends meet as they get older.
Within two generations, Britain will be in the position where more than half the population is over the age of 50 – yet an increasing number of them will have little or nothing left to pass on to future generations, putting an intolerable strain on public services and local authorities, and signalling the death of consumerism as we now know it.
We cannot avoid this economic iceberg.
For millions of people it is already too late and the remainder of their working life is too short for them to prepare properly. But we can avoid the worst case scenario if – as a society – we act now to ensure that younger generations are aware of the danger and take responsibility for their own futures.
Specifically, there must be a fundamental shift in attitude towards saving for retirement, and the financial facts of life must be made clearer to those in the middle range of their working life.
•   The financial services industry, as a whole, must demystify the way it sells products, ensuring that those who do buy pension plans, annuities, or products such as equity release, are aware of exactly how much income their investments will generate for them.
•   Independent Financial Advisors should work closely with their clients to ensure they are much better prepared for the long term effects of retirement – no matter how far in the future it seems.
•   Consumer brands in all sectors must be aware of this impending drop in spending from the demographic which has traditionally kept the cash tills ringing, and invest in long term, integrated customer relationship management programmes to ensure continued customer loyalty when the chips are down.
•   The Government – whatever its colour – should invest resource and finances in ensuring the message to the workforce is loud and clear. Pension planning is a personal responsibility and the sooner you start, the less likely you are to face painful decisions later in life.


For decades, consumer spending in this country has been under-pinned by the older generations. More specifically, by the 50-65 year old pre-retirees who are at the peak of their earning power and buy more big ticket purchases than any other age group. They buy more cars, more holidays, book more restaurant tables and buy more white goods. They also save more and buy more financial products than other age groups.
The current generation of 65-75 year olds are also active consumers and, in the main, are benefitting from low levels of debt, low levels of household overhead and have a high proportion of disposable income.
But as the population ages, and as life expectation increases, we are entering different territory.
The effects of the Post-War “Baby Boom” are still being felt, and the proportion of people in retirement is going to grow rapidly over the next 20 years as those born between 1946 and 1964 leave the workforce. There are already more people over 65 than under the age of 16.  
Millions of today’s  50-65 year old consumers will retire financially under-prepared and with the prospect of perhaps 20 or 30 more years to fund.
The average pension pot at retirement is less than £30,000 which, for a healthy non-smoker who could live for a further 30 years, would generate an income of only around £1,500 per year – or £25 a week. For consumers who have been used to a relatively high disposable income, the transition will be harsh.
But that is only the tip of the iceberg.
In a recent survey, the Institute of Financial Planning found that 77% of respondents have no clear idea of their retirement needs and 74% do not believe their current savings plan would be enough to achieve their financial goals.
This is backed up by our own research conducted this month among a panel of consumers aged from 50-85.
Of those who are already retired, 46% believe they do not have enough income to sustain them and any dependents for the rest of their lives.  Of those over 50 but still working, 77% don’t believe they have planned their finances well enough to ensure a good income in retirement.
Of all respondents, 94.5% said their financial priority was to ensure they had enough income to live well and not have to worry about issues such as the cost of long term care if required. Just 5.6% said their main priority now is to leave an inheritance to dependents.
The Government’s own figures show that almost 10% of the UK workforce of 25.5 million currently has no pension provision in place at all, and almost a quarter of all workers say they are planning on using property to fund their retirement.
However, for them the reality then would be either to sell the family home and downsize, using the equity released as a pension pot to buy an annuity. Or enter into some form of equity release deal allowing them to stay in the home, but effectively giving away a percentage of the home’s value – with the debt being settled when they die. Either option, of course, means yet another piece of wealth erosion.
The message here is loud and clear. Much of the accumulated wealth in this country is going to evaporate and discretionary spending is going to drop substantially. Brand owners should be aware of this and begin planning for it. And those in Government and the financial services sector must take responsibility for consumer education to avoid the worst of the fallout.
•   Dick Lumsden is Managing Director of Senioragency, one of the few companies specialising in marketing and advertising to the 50+ group. Contact him on dlumsden@senioragency.co.uk  or visit the website at  www.senioragency.co.uk

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UK advertising agency specialising in integrated campaigns targeted at 50+ consumers. Deep sector insight, experienced in all media channels.
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Source:Dick Lumsden
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Tags:Inheritance, Pensioners, Retirement, Crisis, Wealth, Retirement Planning, Pensions, Income
Industry:Financial, Lifestyle, Family
Location:England
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