Coronavirus outbreak accelerates wealth transfer between generations
Clive Bolton, Managing Director of Savings and Retirement at LV=
Coronavirus has been a huge shock to the UK and our survey of the UK population’s financial confidence, health and attitudes to spending, saving and wellbeing reveals just how worried people are about the future.
Figures from our recent Wealth and Wellbeing Monitor* highlights how the Coronavirus crisis is continuing to disrupt the finances of people in the UK.
The research reveals that many young people are feeling the financial effects of lockdown more than other groups and are most likely to receive financial help from family.
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Those aged 18-34 have been hit the hardest. They are twice as likely (6% vs 3% of general population) to have taken out a loan to make ends meet, and four times as likely to have received financial support from family and friends than over 35s (8% vs 2% of over 35s).
People aged over 65 are faring relatively better. Those aged over 65 are less likely to say they are struggling with their finances (17% compared to 31% of the general population). This is probably because they receive the State Pension and are more likely to have a final salary pension, which gives them the financial security to help younger members of their family.
This group (11%) are more likely than any other age group to have offered financial support to family who are struggling financially.
Affluent consumers considering early retirement
It is not surprising to see how more affluent people are becoming more interested in early retirement.
Increasing numbers of affluent consumers – those with between £100,000 and £500,000 of assets excluding housing - are reacting to the current situation by thinking about turning their dreams of early retirement into reality. More than one in ten (12%) mass affluent clients have considered taking, or have taken, early retirement in the past three months compared to 4% of the general population.
This group are also twice as likely (20%) to be planning to use the value of their homes to fund retirement compared to the general population (10%). The figures highlight how the idea of using property to fund retirement is becoming accepted by a growing proportion of consumers.
Early retirement is attractive for many people but it has serious implications for retirement finances. Retiring five years earlier than anticipated, for example, means five years fewer contributions and an additional five years withdrawing money from a pension. Without proper planning it increases the likelihood of running out of money in retirement.
Disrupted retirement plans for many
The Covid outbreak is disrupting the retirement plans of thousands of people aged 55-64. Some 40% of those surveyed approaching retirement (aged 55-64) say their finances are worse now than three months ago. In contrast, 31% of those aged 35-54 say their finances have worsened.
One in four aged 55-64 have seen a fall in income from work. Despite being close to retirement, only 3% of those aged 55-64 are putting any spare money into their pension, instead opting to keep it in their current account (28%) or savings account (28%).
As we all know the coronavirus outbreak has changed life in a way that is almost unimaginable. Lockdown, job furloughs and stock market crashes have all combined to make the future uncertain. We are living in an age of disruption and never has good-quality financial advice been so valuable. Future waves of research will reveal how these trends change, how they are affected by regional lockdowns and how worried or optimistic people are about the future.
* LV= surveyed 4,000 nationally representative UK adults via an online omnibus conducted by Opinium in September 2020.
Read more from our Wealth and Wellbeing Monitor