More than a third (36%) of employees expect their health and care costs to increase substantially in retirement, according to research by consultancy Barnett Waddingham.
Its The at retirement reckoning report, which surveyed 5,000 UK employees, found that 47% of respondents expect costs to remain unchanged, while 38% expect costs will stay the same in their second decade of retirement, and 33% into the third.
Among respondents aged 55-64, 51% expect health and care costs to remain stable in the first decade, and 38% and 30% anticipate this into the second and third decades, respectively. While 34% expect increased costs in their first decade, two-fifths anticipate increased costs into their fourth decade of retirement.
A fifth (20%) expect that they will be retired for 10-15 years, however, 18% considered their current health when estimating and 20% their lifestyle decisions.
While 43% thought about the possibility of a serious illness, just 19% have considered it and 28% have not considered it at all. Only 17% have considered fully going into care into their retirement plan, 40% have thought about it but not considered it fully, and 31% have not considered it at all.
Meanwhile, respondents expect to receive an average workplace pension income of £20,435 per year. Those aged 18-24 and 25-34 expect they will receive £24,900 and £23,900, respectively. However, those aged 45-54 and 55-64 expect to receive £19,400 and £17,750, respectively.
Mark Futcher, partner and head of DC [defined contribution] at Barnett Waddingham, said: “While there are numerous factors to take into account, what’s evident is that very few people are even thinking about their health or care considerations when planning for their retirement. As a result, we’re at risk of a growing population with woefully inadequate pension savings that could buckle under pressure at the slightest sign of illness in retirement.
“While education, awareness and financial guidance will play an important part in fixing this problem, the inadequacy of auto-enrolment workplace pension contributions is the main problem that must be resolved. With details of the government’s highly-anticipated pensions review still to come, there’s an urgent need to fix our pension system to ensure better outcomes for retirees.”
