Go back a few decades and the average family unit consisted of Mum, Dad and 2.4 children. 2.4 Children also being a popular comedy TV series in the 1990s about an average family. In this actuarially average family Dad was three years older than Mum, and Mum was expected to live three years longer than Dad. Mum would therefore be expected to live six years on her own without Dad, but those 2.4 children would be there to support her. She would not be on her own.
The pension would be there to provide income in retirement provided that Dad did not overlook Mum when he bought his annuity. The State pension continued to be paid to widows while the house was for the benefit of the children and talk of using it for any other reason was frowned upon. Families did not consider that anything would go wrong with this happy world. They wrongly believed that if Mum needed caring for, the State would provide.
Latest statistics show that the birth rate continues a declining trend that has occurred for many years now. This is being accompanied by an increase in childless couples. Also the number of single households is on the increase. Therefore, if the stereotypes of average families are evolving, product providers and advisers need to be more flexible in the solutions they offer.
Between 2005 and 2015 the number of people aged over 75 living on their own increased by 3.5% to 2.08 million. This would be explained by increasing longevity and could be explained by the stereotype family described above. However, close examination of the statistics reveal that in 2015 there were 1.55 million people aged 65 to 74 living on their own, an increase of 21% over the previous decade. For those aged 45 to 64 there has been an increase of 17% to 2.47 million.
Overall in the UK there are of the 27 million households; 7.7 million are single person, over 25% of the total. This will include large numbers of young adults who will eventually live with another adult. Out of 18.7million families, 3.2 million - nearly one in six - are co-habiting.
These statistics clearly show a large number of people who need financial planning advice especially as they move into retirement. For instance, look at the single retiree with no children. The issues that should be discussed are numerous but probably more important than if they had a stereotypical average family.
What are their objectives for their wealth? Do they want to leave bequests to a wider family or do they not have one? Will they target to run their wealth down to close to zero over their retirement? Are they aware of the intestacy rules that apply to them? Do they want a distant relative with whom they have no contact to inherit their wealth? Are they happy for their estate to become the property of the State?
Who will look after their interests if they become incapable of doing so? They will not be able to call upon unpaid family carers as they won’t be available should the need arise. Therefore understanding their attitudes to their care needs and putting contingency arrangements in place needs to be considered.
Co-habiting retirees are also becoming more common. All the above issues have to be considered but in a different context. What rights does each partner have? On death would the surviving partner be made homeless because the family of the home owner would inherit and want to sell it?
What income would the surviving partner be able to call upon? Would they qualify for any dependents pension under a defined benefit pension schemes or an annuity? Should the defined benefit pension be transferred to an arrangement where to cohabiting partner could inherit the balance of the pension? How can this be achieved when the scheme administrator may wish to consider the circumstances of other family members?
If they want to mortgage for equity release or otherwise does anything need to be done to the title to the house to enable this to be done? Would this have any effect on wills that already exist? If both partners have families of their own, how do existing arrangements impact on their financial plans? What if one or both of them have yet to divorce?
The statistics show that we are moving into more complicated family models. With the changing profile of households, financial advisers may need to do a lot of preparatory work to create the situation where the plans and objective of the household can be delivered. However, if they can, then advisers are likely to be pushing at an open door with this demographic. The advice requirements are clear and obvious