We must catch up with the reality of retirement

A pretty miserable survey came out last week from Aegon. Its annual Retirement Readiness Survey found what it calls a "picture of global unreadiness". The majority of the 12,000 people from 12 different nations surveyed said they were expecting to enter retirement worse off than their parents, "while also "having to support adult children who have not been able to find jobs".

However, 43% also said that they both hoped and expected to stop full-time work later than they might have once hoped to, and also to "transition gradually into retirement" perhaps by working part-time or accepting lower pay for less responsibility.

That, you might think, sounds perfectly reasonable. After all, many of us live longer and healthier lives than our grandparents would have dreamed of, so why would we (or should we) retire at the same age as they did? So far so good according to the Office for National Statistics, 960,0000 people in Britain over 65 are still in work. But there's a problem.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Older people might now often have the same financial profile as younger people many healthy earning years ahead of them but the financial services industry still treats them as an entirely different kettle of fish.

Take mortgages, says Rosie Murray-West in The Daily Telegraph. Someone well under 75 could take out a home loan from Leeds Building Society for a mere 2.53%, as long as they had equity of 25%. But if you're over-75? The price of the money would be 80% higher at 4.49%.

Worse, most conventional mortgage lenders won't make offers to the over-70s at all: West Bromwich has just cut the maximum age a borrower can be at the end of their term from 80 to 70. The result? Older borrowers, who find that for whatever reason (an underperforming endowment perhaps) they need a late mortgage, end up being forced into equity release instead. The average rate for these is now 6.3%. But this isn't just about houses.

A letter to The Times this week notes that, once a person turns 70, nearly all types of financial services firms line up to "say they are no longer willing" to provide them with products such as health insurance.

The "contradiction is clear", says the author, Jill Hill. We want everyone to work until they are "incapable", contributing to revenues and avoiding becoming a drain on the public purse. But at the same time we refuse to provide older people with the "same rights as younger able bodied/minded people".

It can't work. If the over-65s are to keep working as they are able to and often need to financial firms should also be "required to keep pace with demographic and social developments in the work place".

She is right, of course. But until the financial world deals with its own unreadiness (this often takes a while), older people will still find themselves, as Murray-West puts it, "without access to the products they need to get on with their lives".