Over-50s are being hit hardest by the cost-of-living crisis and face serious financial insecurity, according to a new report from the University of Edinburgh’s Smart Data Foundry.

The research shows that economic inactivity rates have risen by a third amongst over-50s since 2019, and people aged 50-54 face double the financial vulnerability risk than older counterparts.

The ongoing cost-of-living crisis, combined with two years of economic hardship during the coronavirus pandemic, means that people in their 50s and 60s are facing the ‘perfect storm’ of circumstances, the report states.

People within this age bracket currently face increased risks of redundancy, ill health or caring commitments. In addition to a lack of savings and pension provisions, this has created a perilous financial situation for many across the country.

To offset current losses of income, many people are being forced to withdraw lump sums from their pension pots to deal with pre-retirement income shocks.  And with the majority of pension pots worth under £30,000, this could cause knock-on issues with income tax and entitlement to benefits.

Notably, the research found that those who do cash in their pension pots early are 1.75 times more at risk of financial vulnerability in the future.

Commenting on the research, Dr Lynne Robertson-Rose from the University of Edinburgh said: “We set out to understand the financial vulnerability amongst those in their 50s and 60s and have been surprised by the bleak picture that the data paint.

“Any disruption in earning capability in the decade before the state pension is forcing older workers to draw down on savings earmarked for retirement with little ability to top up the pot, leading to the risk of financial vulnerability becoming lifelong.”

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Chair of Smart Data Foundry, Dame Julia Unwin, added: “We are seeing a pattern of people in their early to mid-fifties going from being in positions of comfortable, middle-aged breadwinners eyeing their future retirement over the horizon, to a generation suddenly finding themselves facing long-term financial hardship.

“A combination of being unable to secure viable work, confused messaging over pensions, little by way of state aid, and the savage cost-of-living rises resulting in many making decisions that could have long-term negative consequences.”

To tackle this issue, Dame Julia called on the Department of Work and Pensions to “intervene to protect and support the most vulnerable before it is too late”.

The report recommended an increase to the current capital limit of £16,000 for means-tested benefits. For those on Universal Credit, it also called for reform of the Support for Mortgage Relief (SMI) loan facility.

Dame Julia said: “If they don’t act now, we will undoubtedly see even bigger problems in the years ahead. Data doesn’t lie; the evidence is there – older workers are at very real risk of financial vulnerability, but it is not yet too late to act.”

The study also revealed a widespread “lack of understanding” about the benefits system, as well as confusion about claims processes.

According to the report, older workers are encountering significant barriers to returning to work, including lack of digital skills, unavailability of flexible working, and retraining needs.

Fintech Summit 2022 | Join the Conversation

The cost-of-living crisis will be a key focus at the ninth annual Fintech Summit, held live at Edinburgh’s Dynamic Earth on 15th September.

The conference is free to attend for people working in the financial services and fintech sectors.

Book your place now: www.fintech-summit.co.uk