Andrea Rozario: The future of retirement must be decided now

If we are really serious about helping people enjoy a comfortable retirement, writes Andrea Rozario, avenues such as property wealth and lending into retirement must be explained to retirees fully and clearly.

The days of retiring at 65 with an ample pension are history for a lot of people – so we all knew the state pension age would have to be raised eventually.

The plans to increase the age to 68 have been in the works for some time, but now the government has decided to bring this hike forward by seven years, with the new age phased in between 2037 and 2039.

This may, on the face of it, seem minor and distant but really it is a rare example of the much-needed future planning we need from government.

Planning for the distant future has always been an issue inside Westminster. Our parliamentary system does not lend itself to policies anchored on the faraway future because governments – no matter what political party forms them – are almost always thinking of the next election.

Focusing only on the next five years makes sense in terms of winning general elections but it can hurt society as a whole as the roots of major issues remain untackled.

There are exceptions but recent history has shown that even when parties do focus their manifesto on future planning, things can end badly.

The ‘Dementia Tax’ catastrophe, for instance, is a prime example of a ruling party not thinking clearly about the future – the Conservatives thought their lead over Labour was so insurmountable they haphazardly put together a social care policy that very nearly cost them the election.

Even if their execution was way off, the Tories were, however, at least right to think ahead. There needs to be more forward-planning from politicians in the future – especially when tackling issues such as our ageing population.

For decades, we have known the number of elderly and retired people is increasing, and yet we have done very little to prepare ourselves for the effects. It reminds me of our approach to climate change. We have known for years we are teetering on the edge of a crisis but, because the impacts feel as if they are somehow over the horizon, we sit back and do nothing.

The elderly are some of the most vulnerable in our society and yet we are allowing thousands of them to slip into poverty in later life. Pensioners today may well expect to live well into their 80s, but how many will live in financial comfort?

Some 1.9 million already live in poverty and this number will continue to swell unless we totally revolutionise retirement. Increasing the state pension age is one bitter pill millions will have to swallow, but it is just one part of a long overdue retirement rethink. Both government and industry must work together now to deliver solutions to those who are approaching retirement with no back-up plan in place.

Obvious alternative

The solution must lie in discovering another funding avenue for retirees, as pensions can no longer carry the entire load. The obvious alternative is property. Pensions may have underperformed in recent times, but the housing market has remained strong.

Pensioners who own their home will, on average at least, have seen it increase in value substantially in the past 20 years or so, and many will have also cleared their mortgage debt.

In fact, the over-65s are sitting on untapped housing wealth worth over £1 trillion, so letting them know how they can access this could go a long way in delivering the retirement they want.

Ultimately, if we do want to help people enjoy a comfortable retirement, avenues like property wealth and lending into retirement must be explained to retirees fully and clearly. We need to launch a campaign of education that is spread nationwide that will give every person the knowledge they will need to understand their options at retirement age.

This must be coupled with an increase in choice, with products specifically tailored to the older generation’s needs. Lifetime mortgages have come a long way, with flexible terms and lower rates but there is still much more to be done to cater for this audience.

Pensions have become just one part of the modern retirement package, so housing and property wealth will have to take centre stage. Regardless of whether people retire at 68 or 88, the landscape has changed. People need to be given the knowledge and power to make their own minds up – and we must deliver this now.

Andrea Rozario is chief corporate officer at Bower Retirement Services