This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Today the Department for Work and Pensions publishes research exploring how people feel about their standard of living and income in retirement and their feelings about their financial future.
This qualitative research comprised in-depth interviews with 30 respondents drawn from the English Longitudinal Study of Ageing (ELSA). The respondents had been retired from their main job for at least two years, had been earning between £10,000 and £40,000 in their last main job and had some pension income over and above the State Pension.
The main findings from this research can be divided into three key themes:
Definitions of different lifestyles in retirement
Respondents identified three categories of lifestyle in retirement: “basic”, “comfortable” and “wealthy”.
A “basic” lifestyle was seen to be one which lacked financial security and independence and was characterised by anxieties around being able to afford everyday costs such as heating bills and replacing household items.
A “comfortable” lifestyle was seen to begin at the point where an individual was able to afford the basic pre-requisites of life, and then had sufficient income left over that they could, therefore, exercise some choice on how to spend it.
A “wealthy” lifestyle was considered to be one where choice was not constrained by budget.
Respondents’ perceptions of their own lifestyle
Respondents generally identified themselves with having a “comfortable” lifestyle. They were reluctant to consider themselves as having a “basic” lifestyle as this was associated with media images of “pensioner poverty” and some saw the “wealthy” lifestyle as also having negative connotations, for example, being wasteful and “frivolous”. However, there was a wide variation in how they defined “comfortable”, based on how tightly they needed to budget in order to exercise some choice over their lifestyle, or whether they felt they needed additional income.
Respondents’ feelings about their retirement income and lifestyle were influenced by both financial and non-financial factors. In particular, the ownership of property and the absence of debt contributed to respondents feeling better off in retirement compared to their working lives, even though their income may now have been lower.
Regardless of their income, health and mobility and support networks were also important factors in influencing whether respondents felt positive about their retirement lifestyle. Even people with higher incomes who lacked this support tended to feel more negative about their outcomes.
Views about the future
A recurrent view among respondents was that their income and assets would not increase substantially in the future but this caused some concern around the erosion of fixed pension income and assets by inflation. Respondents were also concerned that the Government might cut benefits and allowances they were currently entitled to such as the free bus pass.
As a way of meeting the threat of escalating costs and prices in the future, respondents felt that they would need to draw on savings and/or reluctantly consider selling their property and downsizing. However, aside from cost, there was evidence of a scaling-down of hobbies due to a lack of desire to take part as they got older.
Respondents tended not to have any concrete financial plans for the future, feeling they would keep drawing on their current income and asset streams. This unwillingness to think about the future was based on a feeling that retirement income was fixed and a reluctance to consider any unpleasant issues that may require financial planning such as the deterioration of health.
Notes to Editors
DWP Research Report No. 773 “Perceptions of income requirements in retirement” is published on 6th September 2011.
The research was conducted on behalf of DWP by the National Centre for Social Research. The report authors are Mehul Kotecha, Natalie Maplethorpe, Sue Arthur, Naomi Stoll, Rosie Green, Natasha Wood and David Hussey.
This qualitative research involved in-depth interviews with 30 respondents drawn from the English Longitudinal Study of Ageing (ELSA). The respondents had been retired from their main job for at least two years, had been earning between £10,000 and £40,000 in their last main job and had some pension income over and above the State Pension.