Income in Retirement
Despite recent reforms affecting state pensions and workplace pensions, the UK still compares unfavourably with other countries in Europe, with a state pension of around £7,500 per annum compared to over £26,000 in Spain and Germany. Private pension provision is a transitory state. Government reforms are making workplace pensions available to more people, while at the same time higher value defined benefit (DB) pensions are being phased out. Huge levels of inequality exist. Although some people enjoy the benefits of good DB schemes, others struggle to survive on a state pension. Costs of elderly social care continue to rise, with people forced to sell their family homes to meet care home costs. We have a number of third sector partners who campaign on issues affecting the elderly such as Age UK, Alzheimer’s Research UK and the Elderly Accommodation Counsel.
Ensuring finances can last through retirement
In October 2012 the government started a six-year process to ensure that all UK employees had a private pension arrangement. In 2011, only 56% of British workers were members of a private pension arrangement. In the private sector, only 42% of people had private pensions, with only 32% of people in an employer’s scheme. An auto-enrolment process is starting to improve matters, where employees are auto-enrolled into workplace schemes, with 93% choosing to stay in the scheme. We are one of the biggest insurers in the auto-enrolment process, with 1.8 million people now in workplace pension schemes.
Our commitment to help people manage their retirement finances continues when people have retired. We have worked closely with the government to ensure that people either get advice on how to plan their money in retirement or receive guidance on money matters from ‘The Pensions Advisory Service’. Since 2014 people who have saved for retirement using defined contribution (DC) schemes have been given greater freedom over how they use their pensions savings. A key concern is to ensure that savings last throughout retirement, including the need to meet any elderly care costs.
Helping pension schemes manage their future
Our investment and retirement businesses work together to help companies ensure that they can meet their commitments to pay pensions. The trustees of defined benefit pension schemes in the UK need to pay benefits on time and in full. As an investment manager and as an insurance company we are able to offer our clients a wide range of growth investment strategies. We use de-risking insurance strategies such as liability driven investments and bulk annuities, to help manage our liabilities.
In 2015 we launched our Legal & General Home Finance business, which helps retired people to use the equity in their homes to boost their retirement finances, with a cash lump sum which can be invested to increase their income or could, for example, be used to make home improvements or pay for care in the home. We are talking to organisations like the London Rebuilding Society to create new ways of keeping people in their homes for longer. The decision to take out a lifetime mortgage is a major decision and isn’t right for everyone. That’s why it’s obligatory to seek financial advice and why we are members of the equity release council to ensure high standards of ethical behaviour are provided.
An alternative way for elderly to make use of the equity in their homes is to move to a smaller home, which is more suited for elderly living. Our own analysis of older homeowners shows there are 3.3 million homeowners who are aged over 55 and looking to downsize in future. However suitable property is hard to come by. House builders are failing to meet the needs of the mid-market, with little available between expensive premium housing and low-cost starter homes. We have campaigned for better housing for the elderly and are looking for suitable opportunities to invest in ‘last time buyers’ housing.
Elderly social care
The cost and quality of long term care remains a desperately serious problem for British elderly people. In 2015, the government announced it was delaying the full implementation of the new Care Act, which sought to cap elderly care costs, to 2020. We are a diverse financial services provider, but still cannot provide a complete solution to help everyone meet their care costs, which can amount to over £39,000 a year. However, the solutions we have invested in include:
- Financing and owning care homes
- Providing finance for people to meet care costs in their own homes, through lifetime mortgages
- Providing insurance for carers
We contributed to the Law Commissions consultation on event fees in the care sector. Our view as a major investor in the care sector is that event fees are unfair for customers. They are also not good for investors in that they make it very difficult to forecast future cashflows to lend against to provide much needed finance into the sector.
Some residential leases require the leaseholder to pay a fee (event fee) when they resell the property, sub-let it, and on certain other circumstances.
Working with charities that help elderly people
- Alzheimer’s Research UK
Our work with Alzheimer’s Research UK, the country’s leading dementia research charity, helps them to raise public awareness of the condition and provide reliable information about dementia. We helped develop a new website, ‘Dementia Explained’, with input from children and families with experience of dementia and with the guidance of dementia experts.
- The Elderly Accommodation Counsel (EAC)
The EAC provides information and advice service for older people and their relatives and carers to help them meet their housing and care needs. We support the EAC in their work to ensure that elderly people and those that look after them have access to the best possible information about housing accommodation. We sponsor the EAC’s annual ‘Housing Awards’ where all housing schemes that use the EAC Resident Consultation Service enter into a competition to identify best practice in specialist housing for elderly people.
- The Royal Voluntary Service (RVS)
Together with the RVS, we launched a new ‘Home from Hospital’ service at Queen Alexandra hospital, Cosham, Portsmouth. This service used volunteers from RVS to work alongside hospital staff to prepare older patients for going home and supporting them following their discharge with up to six weeks of regular home visits. This proved crucial in helping people settle back home, making a big difference to their recovery.
- Tax Help for Older People
Our retirement business (LGR) has a longstanding relationship with specialist charity Tax Help for Older People (TOP) to help our older customers understand tax issues. TOP is staffed by ex HMRC employees who work to help customers over the age of 60 whose income is less than £20,000 work out their tax position in later life.
Deliver 6 national consumer campaigns that position us as a thought leader in the debate on Housing, Later Life and Health.