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The big picture: the macroeconomy and saving for retirement
Ben FranklinSenior Research FellowInternational Longevity Centre@ilcuk @bjafranklin
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Retirement income planning conference
What am I going to cover?
• What are our medium to long-term economic prospects?• Where is growth going to come from?• How might this impact peoples’ savings decisions?• How might this impact people’s investment decisions?• What are the consumer risks?• What might be done to mitigate these risks?
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Retirement income planning conference
Living in a low growth environmentRecoveries from various recessions
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Retirement income planning conference
A consumption driven recovery
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Retirement income planning conference
…continuing falls in real earnings
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Retirement income planning conference
…household debts expected to keep rising
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Retirement income planning conference
Monetary policy in response to a crisis
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Retirement income planning conference
…Eurozone monetary policy
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Retirement income planning conference
Exceptional monetary conditions driving search for yield
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Retirement income planning conference
…and continual demand for propertySafe as houses? Inflation adjusted house prices can take time to regain losses in value
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Retirement income planning conference
Implications for consumers…
• Private savings hard to grow in current environment. • Debt will remain key part of the picture unless earnings
rise.• The search for yield will continue to shape savings and
investment decisions.• But consumers at risk from corrections in risky assets
including equities and property.
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Retirement income planning conference
Mitigating the risks?
• Economic rebalancing.• Flexibility in savings and investment products.• Diversified default funds.• Access to good quality savings and investment
advice.
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Retirement income planning conference
Many thanks
Ben FranklinSenior Research FellowInternational Longevity Centre - [email protected]: @ilcuk
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Ageing? Who Cares?
Nick KirwanDirector, Care Funding Advice NetworkInternational Longevity Centre@ilcuk @nickinse1
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Retirement income planning conference
The effects of ageing?
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Retirement income planning conference
The effects of ageing?
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Retirement income planning conference
The Care Act – financial points at a glanceFrom April 2015…• Universal deferred payment scheme• National eligibility criteria• Local awareness campaign (target: carers and users)
From April 2016…• Capped-cost means-tested partnership• Care costs cap £72k (excludes living costs & top-ups)• Means-tested support up to £118,000• National awareness campaign (target: everyone)• Expect removal of exemption for investment bonds
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Retirement income planning conference
Paying for Care
“For the next 20 years, almost everyone needing later life care is today already retired, and will need to use the
assets they already have – mainly their pension, savings and home.”
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Retirement income planning conference
People age 65+
Age Group Males Females TOTAL65-69 1,435,000 1,531,000 2,966,00070-74 1,120,000 1,238,000 2,358,00075-79 829,000 976,000 1,805,00080-84 593,000 770,000 1,363,000
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Source: ILC-UK and Cass Business School
UK individual income/wealth distribution age 65+
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Source: ILC-UK and Cass Business School
The new means-testing zones
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Capital
Income
Source: ILC-UK and Cass Business School
Where will the money come from for care costs?
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Immediate Needs Annuities
Insurance and Pensions
Home Equity
Source: ILC-UK and Cass Business School
What financial products might people use?
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Retirement income planning conference
Preparing for CareBefore the point of need…• National awareness campaign• Guidance Guarantee• The “conversation”
– Care choices– Which assets– Mind the gap
• Lasting power of attorney (LPA)• A financial product?
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Retirement income planning conference
Planning for CareAt the point of need…• Local Authority becomes the “portal”• “Independent financial advice” (practice guidance)• Care at home…
– Attendance allowance– Equity release
• In a care home…– How to use the home– INA?
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Retirement income planning conference
Many thanks
Nick KirwanDirector, Care Funding Advice NetworkInternational Longevity Centre - [email protected] 234227Twitter: @ilcuk @nickinse1