Dominic Grinstead, managing director of MetLife UK, has warned that although most Brits are worried about the financial liabilities of falling ill during retirement, still most fail to make provisions for it in advance.
The company’s research found that not too many people are taking the cost of ill-health into account while planning their retirement and higher life expectancy, Mr. Grinstead added.
“Increased life expectancy should be changing the way people save for their retirement, with many now having to prepare for as long as 30 years”, he said.
“We all want to have a healthy retirement but the risk of ill-health is real and retirement planning needs to adapt to enable savers to be able to cope financially with this”, he added.
Mr. Grinstead’s observation follows MetLife UK’s findings that showed although 73 percent people were worried about coping with illness if they were to fall ill during retirement, only 27 percent non-retired over 60s had actually made preparations for ill health during retirement.
The sample survey of 1000 respondents also found that men were better at planning for ill-health with 31 percent making financial preparations compared to 23 percent of their female counterparts.
The analysis also found women were more likely to spend longer time in poor health during retirement, 11 years, compared to men’s average of 8 years.
Nonetheless fixed-term annuities, which offer more flexibility than traditional annuity products, can be better suited under such circumstances, said Mr. Grinstead.
Unlike conventional lifetime annuities, fixed-term annuities can have as short terms as three years with the option of death benefits. Savers can start drawing incomes at the start of retirement and reassess their requirement at the end of the term depending on circumstances, he added.
However, what type of annuity or income drawdown an individual requires should be best left to savers, said Brian Tabor of Carematters.
“People never think that they will get sick, regardless of what stage of life they are at. From an insurance point of view, private medical insurance can help. Looking at the income side, providers such as MetLife that deal with specialised annuities make a good point”, he said.
“If you take a temporary annuity and become ill, when you get your guaranteed capital back at the end of the term, you may be able to buy an enhanced annuity, so your illness will be an added factor. However, if income in retirement is not a huge problem, the client might be more focused on leaving an inheritance behind, in which case an annuity would not be suitable. Each case is unique”, he added.