If you are retirement planning in Cheshire or Oswestry, new research has exposed the link between cognitive decline and loss of wealth.
The study, commissioned by the Institute for Fiscal Studies (IFS), found that people who experience this in later life are often impacted financially. The findings have led to calls on policymakers to boost support for retirees.
The IFS report drew its conclusions from two decades of data, collated by the English Longitudinal Study of Ageing. It identified stable patterns of memory and cognitive strength in people’s 50s and 60s, before dropping sharply in their 70s. So, what does this mean from a financial perspective? In comparative terms, the study sample of people who experienced cognitive decline recorded approximately £30,000 less in net financial wealth than those who did not. Wealthier households saw the most noticeable divergence.
The IFS study comes at a time when an increasing percentage of retirees are dependent on defined contribution (DC) pension pots rather than defined benefit (DB) schemes. As a result, they are having to keep making financial decisions well beyond retirement age, and sometimes at a stage of life when cognitive decline is very real.
New regulations will oblige pension schemes to give people the option of a default retirement income product. The IFS says that annuitising some of a pension pot at the age of 75 or 80 might help protect retirees from bad decisions based on poor judgements. It stresses the importance of seeking suitable financial advice, having a clear idea of power of attorney, and of individuals and their families alike being fully aware of risks.
