By STEPHEN WOMACK
PUBLISHED: 21:02 GMT, 31 March 2012 | UPDATED: 07:59 GMT, 1 April 2012
Article from This is Money
More than 860,000 men and women in Britain will celebrate their 50th birthday this year – a record.
And the numbers turning 50 will grow over the next few years, with almost 900,000 due to pass that milestone in 2014.
But they reach this landmark age facing more financial challenges and uncertainties than previous generations.
Endowment hit: Stephanie and Ray Wilton with Emily, left, Elizabeth, William and Edward, have found their policy falling £25,000 short.
Traditionally, your 50s was the final stage of working life before retirement. With children leaving home, and often mortgages finally repaid, fiftysomethings had surplus cash to save and, often backed by generous final salary pensions, could start to plan towards a long and relatively comfortable retirement.
But the family and financial dynamics of turning 50 have changed, with many children of the Sixties starting their families later in life.
Philippa Gee of Philippa Gee Wealth Management in Church Stretton, Shropshire, says: ‘Today’s 50-year-olds are more likely to have teenagers and young adults still in the house as well as caring responsibilities.’
On top of this, higher housing costs and increased family break-ups mean that mortgages remain a big challenge. Almost half of those aged 50 are repaying mortgages and expect to be doing so until 58 on average.
The generation burned by investments
Today’s 50-year-olds have often been disappointed by investments and savings – they are the ones whose mortgage endowments have failed to deliver. Pension and investment company MetLife calls this age group the uncertain generation, U-Gen for short, and has conducted research into its financial situation.
Dominic Grinstead, managing director of MetLife UK, says: ‘The past few years have seen unprecedented stock market volatility, making planning difficult.
‘This volatility comes at a time when 50-year-olds are seeing the big switch from defined benefit to defined contribution pensions, where they have to take on all the investment risks.’
Underperforming investments are one extra challenge for Stephanie and Ray Wilton.
She is 50 in October while he is already 51.
The couple have 18 months left on the mortgage on their home in Cheltenham, Gloucestershire. Stephanie, a specialist in handling insurance asbestos liability cases, says: ‘I feel that paying off my mortgage is going to be one of the major achievements in my 50s.’
But she and Ray are facing an estimated £25,000 shortfall on the loan because their endowments may not pay enough. This means that Ray, an engineer, and Stephanie may have to take on a further loan for a few years to clear their shortfall.
Stephanie says: ‘We paid £80,000 for the house and it is now worth about £400,000, so in relative terms we can cope with the shortfall. But I know that the previous generation saw their endowments deliver with extra profits besides.’
Gee says many of those in their 50s are focused on clearing mortgages quickly. ‘The bigger the mortgage, the longer you are going to have to work to clear it,’ she says.
‘I now see clients downsizing their homes earlier in life, often as soon as children have moved on, allowing them to pay off the mortgage and concentrate on saving.’
Once their mortgage is repaid, the next financial challenge for Stephanie and Ray is helping their children with the cost of further education.
The couple have four children living at home – Emily, 16, William, 15, Elizabeth, 13, and Edward, 11. Their eldest daughter Daisy, 24, has severe learning difficulties and is in a residential care home.
The Wiltons could potentially have three children in university at the same time, all of them facing big tuition costs.
Stephanie says: ‘I’m not keen on asking the children to start life with a big debt hanging over them, so helping with university fees will be the second big hurdle of our 50s.’
Putting a financial plan in place is essential to meet the new challenges. Gee says: ‘Your 50th birthday is a good excuse to review matters. It might well be the last opportunity you have to do a major overhaul and change of strategy for your finances.’ Grinstead says: ‘You really need to plan and chart a path towards your own retirement. You can no longer trust to luck that you are going to get there in good shape.’
More than half of those turning 50 this year who were interviewed by MetLife said they wanted financial advice to help them take the right course. But only one in ten had sought any.
Michele and David Lees have a clear plan of how they want to steer their finances through the next decade. David, a foreman in an insulation factory, is 51. Michele, a customer assistant at a building society, was 50 in February.
She says: ‘Our view of life has always been that if you can’t afford it, then don’t have it.’
The couple took a deliberate decision to stay in the first home they bought after they got married, a three-bedroom terrace house in Oldham. They concentrated on repaying the mortgage, rather than trying to move up the ladder to a bigger, more expensive property.
The strategy paid off. They cleared the mortgage in 2009 and can now do other things with their money.
Their biggest financial focus in the next decade is on building up savings. Michele says: ‘David is due to retire a year before me, but neither of us wants to go on working until we’re 67. Ideally, I would like to retire at about 63 or 64.’
The couple both pay the maximum they can into their company pensions and are also saving hard into deposit accounts.
Michele says: ‘Each month we set a budget and then anything spare goes into savings. We don’t want to stay in Oldham in our retirement. We want to have the option of buying another house so that we can move, even if we can’t sell this one.’
A study by Aviva last month found that four out of ten of those aged 55 or over had given money to help family with essential bills over the past year. Parents had gifted an average of £1,400.
And even though their children have long flown the nest, David and Michele are still supporting their family. Their daughter, Nicola, 25, is married and has two children, Connor, 6, and Olivia, 5, while their son, David, 27, had his first son with his partner in February. Michele says: ‘We know that bringing up children is expensive, so we try to help out with things such as buying school uniform and shoes. We recently paid out for some extra after-school science lessons to help Connor.’
They also pay half the cost of car insurance for Nicola and her husband, Aaron Dockerty. Michele says: ‘Having paid the mortgage, we have the flexibility to support the rest of the family when it is needed.’
I am using my experience in a job I enjoy
Longer lifespans and rock bottom annuity rates have put paid to the dream of retiring in your early 50s for all but the wealthiest few.
Philippa Gee of Philippa Gee Wealth Management in Church Stretton, Shropshire, says: ‘The expectations of early retirement have gone. Many of my clients reach 50 and see themselves working for another 15 to 20 years.’
Those who are turning 50 this year were due to collect their State pension at age 66 in 2028. But under Government plans announced last November, which have yet to be confirmed by Parliament, most will now have to wait until age 67. And many expect these retirement ages will be put back further as the Government tries to balance its books.
Bursting with energy: Angela McConnell, with partner Gary Sawtell, is her own boss, running several businesses in between training for half marathons
Dominic Grinstead, managing director of pension and investment company MetLife UK, says: ‘The whole pattern of retirement is changing.
People are moving away from this idea of a cliff-edge where you are working one day and then retired the next, and looking at a gradual transition into retirement perhaps though doing a different job or working for yourself.’
Gee says: ‘If you are carrying on working for so long, you might as well do something you enjoy. I often see clients making a change of career and doing a completely different job in their 50s.’
Angela McConnell is embracing the chance to be her own boss, running not one but two businesses.
Angela, who turns 50 in July, has set up the Happy-Lappy computer training company, which specialises in helping older people to use technology. She also helps small businesses with website design.
Angela, from West Lulworth, Dorset, says: ‘I got to the stage in life where I wanted to be using my experience in a job I enjoy. I was fed up with younger people who had lots of qualifications but no experience or common sense telling me what to do.’
So she and a business partner started out on their own, visiting people in their own homes to help them get to grips with computers.
She also runs amycottage.co.uk, a bed & breakfast business from the 17th Century thatched cottage she shares with her partner, Gary Sawtell, also 49, who is an engineer.
Angela is a keen runner, taking part in ten-kilometre runs and half marathons. ‘My mind and my body aren’t telling me that I am going to be 50 this year,’ she says.
The couple share their home with her two sons, Tom, 18, and Harry, 16.
Angela, who served 19 years in the Army in administrative roles, will collect an Armed Forces pension when she is 60, but she is not saving for any other pensions.
‘The business will hopefully be my pension and I can carry on doing the B&B as much as I need to, even after stopping other work,’ she says. ‘I have avoided loans or credit card debt so I feel we are in a strong position.’
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