Save More Now to Protect Against Risk of Illness in Old Age

According to Scottish Widows more than 44% of the British population admit that their savings would last just a couple of months or less if they became unable to work

Karen Kwok 27 April, 2016 | 9:20AM

Savers are being warned to up their ante – or prepare for poverty in old age. Savings rates may be at record lows, but as life expectancy rises thanks to the medical and technology enhancement so too does the need for a decent savings pot.

Men can now expect to live for further 19 years at age 65, while women can expect to live for a further 21 years at the same age, according the latest figures from Public Health England.

But according to BlackRock’s Investor Pulse survey, four in 10 of the average British have not started to save for retirement. This is despite expressing a desire to retire at 64 years old with an annual retirement income of £23,000, which requires 15-20% contribution of their salary annually. As a result people find themselves having no choice but to work into retirement.

Unprepared for the Unexpected

Saving more for retirement does not only prepare you for a longer life expectancy, but also to cover unexpected expenses over emergencies and illnesses.

According to Scottish Widows more than 44% of the British population admit that their savings would last just a couple of months or less if they became unable to work, raising concerns over the nation’s financial resilience should the unexpected happen.

Anne Reed, managing director of Paladin Advocates, a law firm that specialises in helping families secure continuing care, said that it is important to prepare for the worst in older age as people need to go through “rigorous” assessment process when applying for healthcare funding, and even the funding is approved, it is then reviewable and it can be taken away.

“Better financial planning means that you have better choices, whether you want to choose a particular institution like nursing house, or to remain in your own home with a one to one healthcare services: it created freedom of choice,” Reed added, “so financial planning is critical.”

As a result, despite the seven years long low interest rate, individuals should start their saving habits as early as possible.

“Even with low interest rates, the benefits of switching to a market-leading saving account can still pay dividends, especially if you haven’t switched for a while, as the rate you will receive on your existing pot will likely be negligible,” said Kevin Mountford, head of banking at MoneySuperMarket.com.

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About Author

Karen Kwok

Karen Kwok  is Editorial Assistant for Morningstar UK