the big picture - the macroeconomy and saving for retirement. ageing - who cares

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The big picture: the macroeconomy and saving for retirement Ben Franklin Senior Research Fellow International Longevity Centre @ilcuk @bjafranklin

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Presentation from Ben Franklin and Nick Kirwan, ILC-UK. November 2014

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Page 1: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

The big picture: the macroeconomy and saving for retirement

Ben FranklinSenior Research FellowInternational Longevity Centre@ilcuk @bjafranklin

Page 2: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

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?

Page 3: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

Living in a low growth environmentRecoveries from various recessions

Page 4: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

A consumption driven recovery

Page 5: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

…continuing falls in real earnings

Page 6: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

…household debts expected to keep rising

Page 7: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

Monetary policy in response to a crisis

Page 8: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

…Eurozone monetary policy

Page 9: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

Exceptional monetary conditions driving search for yield

Page 10: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

…and continual demand for propertySafe as houses? Inflation adjusted house prices can take time to regain losses in value

Page 11: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

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.

Page 12: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

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.

Page 13: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

Many thanks

Ben FranklinSenior Research FellowInternational Longevity Centre - [email protected]: @ilcuk

Page 14: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Ageing? Who Cares?

Nick KirwanDirector, Care Funding Advice NetworkInternational Longevity Centre@ilcuk @nickinse1

Page 15: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

The effects of ageing?

Page 16: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

The effects of ageing?

Page 17: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

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

Page 18: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

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.”

Page 19: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

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

Page 20: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Source: ILC-UK and Cass Business School

UK individual income/wealth distribution age 65+

Page 21: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Source: ILC-UK and Cass Business School

The new means-testing zones

Page 22: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Capital

Income

Source: ILC-UK and Cass Business School

Where will the money come from for care costs?

Page 23: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Immediate Needs Annuities

Insurance and Pensions

Home Equity

Source: ILC-UK and Cass Business School

What financial products might people use?

Page 24: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

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?

Page 25: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

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?

Page 26: The big picture - the macroeconomy and saving for retirement. Ageing - who cares

Retirement income planning conference

Many thanks

Nick KirwanDirector, Care Funding Advice NetworkInternational Longevity Centre - [email protected] 234227Twitter: @ilcuk @nickinse1