The big picture: the macroeconomy and saving for retirement

Ben FranklinSenior Research FellowInternational Longevity Centre@ilcuk @bjafranklin

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?

Retirement income planning conference

Living in a low growth environmentRecoveries from various recessions

Retirement income planning conference

A consumption driven recovery

Retirement income planning conference

…continuing falls in real earnings

Retirement income planning conference

…household debts expected to keep rising

Retirement income planning conference

Monetary policy in response to a crisis

Retirement income planning conference

…Eurozone monetary policy

Retirement income planning conference

Exceptional monetary conditions driving search for yield

Retirement income planning conference

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

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.

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.

Retirement income planning conference

Many thanks

Ben FranklinSenior Research FellowInternational Longevity Centre - UKbenfranklin@ilcuk.org.uk02073400440Twitter: @ilcuk

Ageing? Who Cares?

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

Retirement income planning conference

The effects of ageing?

Retirement income planning conference

The effects of ageing?

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

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.”

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

Source: ILC-UK and Cass Business School

UK individual income/wealth distribution age 65+

Source: ILC-UK and Cass Business School

The new means-testing zones

Capital

Income

Source: ILC-UK and Cass Business School

Where will the money come from for care costs?

Immediate Needs Annuities

Insurance and Pensions

Home Equity

Source: ILC-UK and Cass Business School

What financial products might people use?

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?

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?

Retirement income planning conference

Many thanks

Nick KirwanDirector, Care Funding Advice NetworkInternational Longevity Centre - UKnickkirwan@ilcuk.org.uk07942 234227Twitter: @ilcuk @nickinse1