insight

Understanding retirement: a deep dive into financial capability among older people

Evidence type: Insight i

Context
The study
Key findings
Points to consider

Context

The Money Advice Service carried out the Adult Financial Capability in the UK survey in 2015. In 2016 they decided to more in-depth analysis was needed, around particular groups of the UK population with specific financial capability needs, including older people.

With numbers of older people rapidly increasing (ONS, 2015; 2013) it is important to understand what this section of the population needs to be financially capable. This ‘deep dive' aims to provide some in-depth evidence relating to areas of strength and concern for older people’s financial capability.

The study

This ‘deep dive’ combines both quantitative and qualitative research:

Secondary analysis of the Adult Financial Capability in the UK (2015) survey data, looking at the 684 complete responses from people over retirement age
Review of relevant financial capability literature
Primary qualitative research – ten interviews with older people situated across the UK

Key findings

Day-to-day money management:

Overall, older people show high levels of financial capability when it comes to their day-to-day money management.
Older people who do struggle with budgeting or find bills a burden tend to be between 55-74, suggesting potential difficulties with adjusting to a reduced income in retirement. Any interventions should be targeted at this group, to improve their day-to-day money management. .

Financial resilience, savings and debt:

Older people show good financial resilience. Most have savings and tend not to rely on credit.
However, the literature review found that where debt does exist it can be problematic, particularly given older people’s fixed and often lower income. Few older people have mortgages, but those who do tend to be ‘struggling’ in the earlier years of retirement (aged 55-64). This suggests that older people do not require widespread debt management support. Targeted interventions at key life-stages are more appropriate; for example when people retire with a mortgage.

Financial confidence, skills and management:

Older people face lower levels of numeracy and literacy, alongside cognitive decline. Meanwhile, they face important and increasingly complex financial decisions that they have not been exposed to before.
Women over 75 on low incomes have particularly low levels of financial skills and knowledge and may benefit from assistance the most. However, there is also a need to safeguard everybody from financial crime.

Discussing money:

Older people are less likely to talk about money, often because of having a lack of opportunity. This particularly affects women aged 55-74 living alone and men who live alone. There is a need to consider how these groups can be encouraged to discuss their financial situation.

Digital exclusion:

Digital exclusion is most likely to affect those over 75; especially women and those on below average incomes.
Only 39% of older people said they were happy to do their banking online. Their reluctance to use online banking was mainly because of fear.
Further research into the role families and trusted friends can play in getting older people online is needed.

Shopping around to maximise income:

Older people are less likely than the working-age population to check if they have the best deals on energy, telecommunications and financial products.
Digitally excluded older people are not always getting the best deals available in the market.
There is a need to establish whether more can be done to promote the benefits of switching to older people, especially those over 75 and on below average incomes.

Planning for long term care:

Older people do not tend to plan how they’ll pay for long-term care. 58% do not have any plans to fund their long-term care.
Those who do plan often feel more empowered that what they do will make a difference to their financial situation.
More investigation is needed into what might help older people plan better for long-term care

Points to consider

Relevance: The Money Advice Service survey highlighted that older people were a section of the population requiring financial capability support, which this study aims to address further.
Generalisability/transferability: The sample in this study broadly reflects the composition of the older population in the UK, in terms of gender split, income and level of internet access.
Applicability: These findings are applicable to the increasing older population of the UK (currently at 11.4 million), although some findings are more pertinent to specific sub-groups.. Women over 75 have the greatest number of financial capability issues; they tend to live on low incomes, have the lowest skills and knowledge and are least likely to shop around. Men over 75 and those over 75 on below average incomes face many of the same challenges, although not to the same extent.
Methodological strengths or limitations: This study uses a mixed-method approach. It is transparent, and clearly indicates throughout where further work and evaluations are required.