According to research from Aviva and Age UK, more than a quarter said they feel financially secure. There is also a gender mismatch, with 19% of women feeling financially confident and 32% of men feeling secure.
The report surveyed around 1,000 mid-retirees aged 65-75 years old who have a private pension, are on a moderate retirement income, do not pay for financial advice or have a final salary pension of over £20,000 per year.
Around 83% said an income for life from their private pension savings has become more vital as they age and a similar proportion said they would be worried if their retirement income fell.
This proportion is higher among women, at 87%, compared to men at 79%.
Exclusive modelling for the report by the Pensions Policy Institute (PPI) shows those mid-retirees over 75 years old who are withdrawing from a £100,000 pension pot at a rate of more than 7% are at significant risk of depleting pension pots prematurely, with a 10% withdrawal rate expected to exhaust pension pots in 13 years.
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For example, a 75-year-old couple with a pension savings pot worth £100,000 who withdraw from it at a rate of 10% have a 75% chance that the money will run out while one of them is still alive.
Aviva and Age UK are advocating for the introductions of a mid-retirement MOT, which would offer guidance and support while they are in retirement.
This would operate as a financial and lifestyle review and would cover conversations about estate planning, fraud protection, access to state benefits and managing finances if they start to experience cognitive decline.
Both parties are also calling for “flex first, fix later” retirement income solutions that combine pension drawdown strategies with a later-life annuity, and should “become the norm”.
The report noted that this would have potential to “deliver better outcomes for people approaching the later part of their life, safeguarding people against major difficulties that may lie ahead for some”.
Doug Brown, CEO of insurance, wealth and retirement (IWR) at Aviva, said: “Pensioners today clearly value financial security, but many seem to be sleepwalking into later retirement with a ‘set and forget’ approach to their retirement income. They are among the first retirees getting to grips with the complex decisions that come with pension freedoms and need more support to make choices that will work for the whole of their retirement years.”
Brown continued: “Choosing to withdraw a private pension at a rate of more than 7% from the age of 75 requires strict financial discipline to make that money last. There is a real danger that without the right advice and guidance in place, pension pots will run out too soon.
“We want to help savers get ready for better retirements by ensuring pension savings last a lifetime. There is a realistic chance that future pensioners will be managing money into their 90s and beyond, facing major challenges that could include the cognitive decline that often comes with age.
“That’s why we are working with Age UK to consider the feasibility of a mid-retirement MOT pilot to help us understand how the industry can better support people to manage their money for a secure, fulfilling later life.”
Paul Farmer, Age UK’s CEO, said: “We frequently hear from struggling pensioners, many of whom have a small private pension of their own, about how tough they have found the last few years.
“Managing your pension and other finances becomes harder as you get older – especially where people have suffered a major life-change like a bereavement or a dementia diagnosis – and so it’s of vital importance that the industry, charities, government and others can all work together to help people at this crucial point in their lives.
“The mid-70s is often a point where people need to take stock and think through their options. We hope this fascinating research project lays the foundations for further support and look forward to exploring the delivery of a pilot programme together.”
