Older people now have to make more important financial decisions than ever before yet little is known about what actually helps them avoid the growing threat of scams, a think tank has said.
The International Longevity Centre UK (ILC-UK) said pension freedom, which gave people over the age of 55 complete access to their pot without the need to buy an annuity, had opened up the retirement income market and in turn placed more financial responsibility on individuals in later life.
It also said a growing number of older people were being caught by financial scams and it was important for the industry to do all it could to reduce the risk. However, its latest report found the financial services industry does not know enough about how to help people be more financially savvy in their old age.
The report looked at a variety of different financial education programmes designed to improve financial capability among older people but could not determine which ones were most effective.
It added good financial capability was an “essential prerequisite for sound decision-making” but there was “not enough evidence out there of what actually works”.
Previous ILC-UK research showed only half of people aged over 55 understood what an annuity was. Income drawdown, which is proving highly popular post-pension freedom, was even less well understood, according to the think tank’s research.
The report was commissioned by the Money Advice Service (MAS) on behalf of the UK Financial Capability Strategy.
MAS director of financial capability David Haigh said: “This report highlights how little we know about how best to improve the financial capability of older people. While there are a number of interventions targeted at older people, there is little reliable and robust evaluation of whether they are truly effective.”
ILC-UK research fellow Cesira Urzì Brancati added: “The world of money is becoming more complex and older people are more diverse in their experience and needs. We need to do all we can to reduce the risk of more older people becoming victims of scams or abuse. Helping people better understand and manage their money has to be part of the solution.
“But while there is a need to raise financial skills across our lives, our research reveals that we simply don’t adequately know how to best help people.”
Dementia risk
Charity Age UK has also been investigating financial scams affecting older people.
Research from the organisation said pensioners with dementia or reduced cognitive function are the most vulnerable to financial abuse or scams.
Figures showed at least 130,000 older people have experienced some kind of abuse from someone they know since turning 65.
Age UK said this form of abuse had been closely linked to negative health outcomes and a decline in mental health and resilience.
Charity director Caroline Abrahams said: “An ageing population brings many positives but also challenges, such as the steep rise in the numbers of older people with dementia and other cognitive problems – which we know are a major risk factor for financial abuse.
“That’s why it is so important that we develop practical tools for organisations, not just in the financial sector but in health and care too, to help staff who engage with older people to be alert to cognitive decline, the consequent risks of financial exploitation and abuse, and how best to prevent and tackle them.”
Old Mutual Wealth retirement planning manager Adrian Walker said some people in the over 55 age bracket would be vulnerable. He urged them to get an adviser to help them deal with financial decisions in later life.
“If you get approached by email or telephone and there are certain things you do not trust you can always report someone you are suspicious of to The Pensions Regulator or the Financial Conduct Authority,” said Walker.
He added it was important to deal with regulated people in financial services as compensation was often available for mis-selling. Unregulated individuals are not covered by operations such as the Financial Services Compensation Scheme.
The post Industry must work harder to save older people from scams – think tank appeared first on Retirement Planner.