Context

The Financial Capability Strategy for the UK asserts that levels of financial capability are much too low. Previous research has suggested that four-out-of-ten people are not ‘in control’ of their day-to-day finances, while long-term planning and managing unexpected major – or ‘life’ – events are areas where people particularly struggle. A steering group focussing on older people in retirement has been set up to establish a ‘community of practice’, which is drawn from different stakeholder organisations to see where collaborative efforts can have optimal impact. One of the priorities has been to develop a fuller understanding of what being financially capable in later life actually means in practice. There are some financial capability issues that are particularly relevant to older people, including:

1. They have generally accumulated their wealth, so unlike other age groups their main financial focus is on managing existing resources.

2. They are living in an increasingly complex financial world, with pension freedoms, a challenging environment for savings and investments, and unrelenting technological change.

3. They are more likely than other age groups to experience changes in their financial situation due to poor health or bereavement.

These issues highlight the need for better understanding of financial resilience during retirement.

The study

This 2018 research attempted to further understanding of what ‘financial resilience’ looks like among retired people, and how it varies by key factors such as social networks, health and finances. It sought to establish what makes older people well placed to deal with life events, and their associated challenges and decisions, throughout retirement. The summary document provides an overview of the research findings, and presents implications of the research. The full report will inform both the Financial Capability Outcomes Framework for Older People in Retirement, as well as questions targeting this age group in the 2018 UK FinCap tracker survey.

The research had two main stages:

1. : An in-depth evidence review was conducted, and a range of experts from the financial sector were interviewed, including industry representatives, consultants, academics, policy experts and other key stakeholders.
2. : The findings from the first stage were tested through focus groups involving retired people aged between 60 and 89. Sixteen focus groups were conducted throughout England, Wales Scotland and Northern Ireland, along with eight in-depth interviews with retired couples. All fieldwork took place between October 2017 and January 2018.

Key findings

• Older people say that being ‘well-placed’ in retirement is about ‘being able to cope with what life throws at you’.
• Older people acknowledge the importance of being prepared, but also stress the importance of trying not to worry too much about the future.
• Older people struggle with multiple uncertainties, both personally and externally in terms of the political and economic landscapes.
• Older people see financial capability as only one factor of resilience.
• Older people think it is important to be confident and independent, but also flexible and adaptable to changing circumstances throughout their retirement.
• Being in denial, feeling disempowered and lacking confidence can act as barriers to financial resilience.
• Terminology around financial resilience does not always resonate with older people. Alternative, more ‘real-life’ language is understood more widely and perceived as more meaningful.

The report also includes some ‘key messages’ and implications from the research:

• A fundamental rethink of the language used in financial services is needed to ensure it resonates with older people.
• Older people think about finances in the context of their life as a whole – financial matters should be approached as part of other aspects such as health and relationships.
• Messages need to balance ‘being prepared’ with ‘making the most of now’.
• A focus on high quality provision of products and information is needed to overcome the lack of awareness, misunderstandings and barriers to accessibility.
• Peer to peer support may help older people overcome emotional barriers to sorting out their finances.

The report concludes by stating that the financial world needs to use more appropriate language for older people, while interventions need to strike a balance between what is reasonable and what is impossible to plan for during retirement. Stakeholders need to improve the provision, accuracy and accessibility of information and advice from all of the sectors older people interact with throughout their retirement.

Points to consider

• This research is based on a thorough evidence review, expert interviews, focus groups and interviews. While the research is qualitative, a thorough approach has been taken and it would be reasonable to accept the key findings as fairly representative of the UK’s older population.
• This report is relevant to all stakeholders and policymakers with an interest in financial capability among older people.
• The research is applicable to the United Kingdom, with research conducted in England, Scotland, Wales and Northern Ireland.