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Press release: Help close pensions gap for the price of a morning coffee


UK’s “Sandwich Generation” urged to re-think saving 

The big squeeze: Wealth Manager launches part two of the Brewin Dolphin Family Wealth Report; a three-part report on financial challenges facing three generations in the UK

  • Report produced with think tank Centre for Economics and Business Research (Cebr); incorporates a substantial 11,000-person, nationally representative survey
  • Problem - UK’s sandwich generation earns the most but saves less than any other age group, as it faces a triple whammy of financial challenges:
  1. Roadway to retirement is running out: with only 180 pay days left to retirement1, 45-54 year olds in the UK still face an average pensions shortfall of £370,000
  2. Their children face a potential 30-year debt burden: Going to university means that many are starting their working lives £54,000 in debt and could spend the next 30 years paying it back, instead of saving for a house deposit
  3. Inheritances at risk: 22% of this age group is relying on an inheritance, but greater longevity means these could be eaten up by future care costs
  • Solution: “It’s not necessarily about finding more cash; it’s about using what you have more effectively. This is the cash equivalent of the butterfly effect; small changes today could make a big difference tomorrow”. The report urges those in the sandwich generation to take advice and plan their finances more effectively

London, 7 December 2016 – Leading UK wealth manager Brewin Dolphin encourages the “sandwich generation” to focus on more active financial planning to help meet the financial challenges facing them from all sides, according to the second part of a major report out today.

Part two of the Brewin Dolphin Family Wealth Report focuses on Britain’s 45-54 year olds, many of who are trying to address the triple whammy of financial challenges posed by their children, their ageing parents and saving for their own retirement. 

A concerning revelation from the report is that despite being at peak earnings, 45-54 year olds are more likely to be saving nothing at all than any other age group.  30% of this group admits to not saving anything, and a fifth (19%) say they are putting away less than 5% of their net income each month. Almost two-thirds (65%) of those who feel they are not putting enough money away for retirement say they have no spare cash to save.

1 For a 50 year old retiring at age 65

The study also finds that this group still faces a substantial pensions shortfall of £370,000 and 64% of them – equivalent to 6 million people – classify themselves as only “getting by”, “making ends meet” or “struggling”2 . Even those in higher income households are feeling the strain, with over a third (36%) of households with incomes between £70,000 and £100,000 classifying themselves in the same way. 

To make life more challenging, the sandwich generation is also trying to provide financial assistance to their children, with university attendance emerging as a chief concern. Many of their children who plan to go to university face the prospect of finishing their course £54,0003 in debt, which over a 30-year repayment period could see them paying back over £87,0004, the majority of it interest, and still relying on the Government to cancel the debt at the end. 

At the other end, this age group also faces the prospect of reduced inheritances as, thanks to greater longevity, elderly parents need their retirement funds and assets to last for longer, potentially reducing the size of their estates on death. Having to meet care costs5 out of these estates may also have a large impact. Almost a quarter (22%) of 45-54 year olds admit that their financial situations would be threatened if an expected inheritance did not materialise.

Liz Alley, Divisional Director of Financial Planning at Brewin Dolphin, comments: “It’s no wonder the majority of this age group are feeling a big squeeze. 45-54 year olds are in the perfect financial storm, facing the combined pressure of providing for their children, caring for their ageing parents, and trying to achieve their own career and retirement ambitions. 

“This is not a hopeless situation though. Many people are unaware of the long term impact adjustments to their discretionary spending can make. The financial effect of small sacrifices made now could be multiplied in a pension over a 20-year term, thanks to potential investment growth."

2 According to the study, 59% of the UK in total, the equivalent of 39m people, describe their personal financial situation as only “getting by”, “making ends meet” or ‘struggling” 
3 Assuming that the full loan amounts are borrowed to cover tuitions fees and maintenance for three years in England (outside London)
4 Assuming child begins working life on a salary of £22,984 and enjoys annual wage inflation of 2.30% with occasional increases allowed for promotion, progressing to a salary of £82,491.68 after 30 years in continuous employment. Using the variable interest rates based on salary, £87,259.32 will have been repaid after 30 years, £70,732.82 of this is interest, with a loan balance of £43,735.93 remaining
5 According to Paying for Care, a not-for-profit company, on average one can expect to pay around £29,250 a year in residential care costs, rising to over £39,300 a year if nursing care is necessary. It should be noted that currently, local authorities do not provide care services for those who have more than £23,250 in savings and property. From April 2020, this threshold will rise alongside the introduction of the cap on care costs. Laing & Buisson Care of Older People UK Market Report 2014/15

Summary of findings:

Pensions shortfall for sandwich generation: £370,000 pensions gap looms with only 180 pay days until retirement (for a 50 year-old planning to retire at 65)

  • 45-54 year olds think that a minimum annual income of £25,000 would be suitable for them in retirement. Deducting a contribution of about £8,000 from the state pension, this leaves an income of around £17,000 that needs to be financed
  • 45-54s think that a pension pot of £252,000 would be sufficient to buy an annuity of this size; however, at current rates, an inflation-linked annuity of £17,000 costs around £530,0006
  • Given that the expected retirement pot of this age group is just £160,000, this implies a substantial pensions gap of £370,000
    64% of those aged 45-54 years old classify themselves as “getting by”, “making ends meet” or ‘struggling”
  • Even those in relatively higher income households are feeling the strain, with nearly half (48%) of people with household incomes of between £60-69,999 per year and over a third (36%) with household incomes above £70,000 and under £100,000 saying they are only “getting by”, “making ends meet” or ‘struggling”

Savings crisis: Age group at peak earnings yet almost a third are saving nothing at all

  • Males in the 40-49 age group are at their peak earnings (females peak between 30-39)7 , yet both males and females in the 45-54 age group are more likely to be saving nothing at all than any other age group
  • 30% of 45-54 year olds are saving nothing, and nearly a fifth (19%) are putting away less than 5% of their net income each month
  • Three in five (60%) of 45-54 year olds do not think they are saving enough per month/ year to ensure they have a comfortable standard of living in the future
  • When asked why this is, 65% say it is because they have no spare cash to save

Despite challenges, the sandwich generation is a generous age group

  • About half (47%) of 45-54 year olds expect to support their children, grandchildren, parents or other adult family members with substantial financial support in the future, suggesting not only their generosity, but also the financial pressures felt by this group
  • When asked for which areas they would provide support, they say they would help family members with getting on the housing ladder (41%); paying for a wedding (41%); making a major purchase (e.g. car) (29%); or paying for care (27%)

Children are defaulting to debt

  • Students attending a three-year course at an English university (outside London) who need to borrow the maximum amount of student loans available to cover tuition and maintenance will leave university over £54,000 in debt
  • Opportunity cost: Using the worked example on page 8, the equivalent amount of student repayments invested in a Lifetime ISA instead could provide a £28,000 contribution to a house deposit after 15 years and assuming growth of 2% p.a.

6 According to the Money Advice Service annuity calculator for an index-linked pension payable to a healthy single, non-smoker, without dependents or a guarantee period, not taking a lump sum  
7 According to ONS Median full-time gross weekly earnings by sex and age group, UK, April 2016

Care costs are threatening inheritances

  • Nearly a quarter (22%) of this age group stated that not receiving an inheritance would threaten their financial situation
  • Similarly, 23% of this age group say they plan to use inherited money and/or property to fund their retirement
  • Residential care costs in the UK are around £29,250 a year on average, rising to over £39,300 a year with nursing care8; 10% of survey respondents said they do not provide immediate family with more financial support because they need more money to cover possible care costs as they get older

“We recognise the pressures on household budgets, but what shocked us was that those most able to save are also the least likely to,” adds Liz Alley.  

“A greater savings culture needs to be encouraged in this country and better financial planning can make a big difference. The first step is to understand that it’s not necessarily about finding more cash; it’s about using what you have more effectively. This is the cash equivalent of the butterfly effect; small changes today could make a big difference tomorrow. Just cutting out the cost of that morning coffee every day could add over £22,000 to a pension fund.”

Brewin Dolphin’s key recommendations
To help deal with the pressures facing the sandwich generation in the UK, financial planning experts at Brewin Dolphin are encouraging them to consider three key areas:

1. Personal pensions - don’t run out of roadway to retirement:

It may seem like there is a long way still to go, but 45-54 year olds are approaching the final leg of their journey to retirement.  With only 180 paydays left (for a 50 year-old planning to retire at age 65) there is no margin for complacency. The financial effect of small sacrifices made now could be multiplied in a pension over a 20-year term, thanks to potential investment growth. In addition, Brewin Dolphin advises people to take full advantage of generous pension tax allowances as soon as they can as there is no guarantee they will be there in the future.
65% of 45-54 year olds say they have no spare cash to save, yet many are unaware of the long term impact adjustments to their discretionary spending can make. For illustration purposes, financial planners at Brewin Dolphin have created three scenarios based on different financial sacrifices, invested into a pension fund with a conservative 2% growth (net of charges) over a 20-year term. Together, these sacrifices could be worth around £130,000 on retirement at age 65 if the savings were invested in a personal pension growing at 2% p.a., helping close the gap for this age group. 
8 Source: Laing & Bussion Care of Older People UK Market Report 2014/2015
  • Sacrifice 1 - boost your pension fund by over £22,000 for the price of a morning coffee: £2.50 spent each working day for a flat white  on the way to work may not seem a big outlay, but this equates to £625 per year. Apply basic tax relief of 20% and this adds £156.25, increasing the total contribution for the first year to £781.25.

    Investing this amount from 45 years old over the course of 20 years, assuming 1.60% annual inflation on the cost of the coffee and a conservative annual rate of growth within the pension of 2% would see the following:
Age  Annual coffee saving10  Annual pension contribution with basic rate tax relief of 20%  Running total with 2% growth p.a. (net of charges) 
46 (year 1)  £625 £781.25 £796.88
50 £665.97 £832.46 £4,279.12
55 £720.98 £901.23 £9,357.08
60 £780.53 £975.67 £15,346.21
65 £845.01 £1,056.26

Total saving into a pension fund: £22,372.96. If the growth rate within that pension fund was 4% net of charges, this saving would increase to £27,675.08.

  • Sacrifice 2 – re-consider that second family holiday every year and add nearly £52k to your fund: More and more families are choosing to go away for two holidays every year, with the average cost of each holiday estimated to be £2,580 .  If families were to forego this second break and reinvest the same amount into a pension fund, it could be worth £3,289.50 after 12 months with basic tax relief applied and growth of 2% (after charges).

    Investing this amount for 10 years from 45 years old, assuming 1.60% annual inflation on the cost of the holiday and a conservative 2% annual rate of growth (after charges) in the pension, and then 2% growth only from 55-65 years old (i.e. no further contributions), would see the following:
Age  Annual holiday saving12  Annual pension contribution with basic rate tax relief of 20%  Running total with 2% growth p.a. (net of charges) 
46 (year 1)  £2,580.00 £3,225.00 £3,289.50
50 £2,749.13 £3,436.41 £17,664.22
55 £2,976.21 £3,720.26 £38,626.02
60 £3,222.05 n/a £46,819.44
65 £3,488.19 n/a £51,692.44

Total saving into a pension fund: £51,692.44. If the growth rate in that pension fund was 4% net of charges, this saving would increase to £69,354.40.

9 Assuming coffee is bought every day for 250 working days per year. Price for a flat white at time of writing from a major coffee chain
10 Assuming annual price inflation of 1.60%
11 According to research by the charity Give as you Live undertaken in 2014, the average family spends £860 per person for a summer holiday.  Our illustration assumes a family of three, spending £2,580
12 Assuming annual price inflation of 1.60%

Sacrifice 3 – the £55k difference between a new car and a second-hand car: The year to October 2016 saw the largest number of new car registrations in the UK in a decade with nearly 2.7 million cars sold; 86% of them on finance13.

Brewin Dolphin’s financial planners have created a scenario based on the purchase of a typical family car – a Vauxhall Zafira14 – and the difference between buying it new and buying a six-year old used model, replacing both with the same every three years.

For this illustration, the average cost of a finance deal has been taken from three leading car finance websites, which provides a new Vauxhall Zafira leasing deal of £300 per month for three years with the upfront deposit of £1,800 also spread over three years.  In addition, an annual insurance premium of £500 is assumed.
This is compared with a second hand value of a similar model of £6,683 that was registered in 2010 with full service history etc. Alongside this cost would be estimated annual upkeep costs of £1,000, including servicing, insurance and road tax, which rises with inflation.

For each three-year period, both the cost of the lease and the used car have been annualised to show the annual saving. The total annualised cost includes both the cost of the car and upkeep.

Using these figures, the following comparison has been produced:

Age  Total annualised cost of lease  Total annualised cost of used car  Saving per year  Saving per year with tax relief  Running total with 2% growth 
48 (end of first three-year period) £4,716.13 £3,259.88 £1,456.25 £1,820.32  £5,714.28
51 £4,946.14 £3,418.86 £1,527.28 £1,909.10 £12,057.01
54 £5,187.38 £3,585.61 £1,601.77 £2,002.21 £19,080.26
57 £5,440.38 £3,760.49 £1,679.89 £2,099.86 £26,839.94
60 £5,705.72 £3,943.89 £1,761.83 £2,202.28 £35,396.07
63 £5,983.99 £4,136.24 £1,847.75 £2,309.68 £44,813.07
65* £6,265.03 £4,316.35 £1,948.68
£2,435.85  £55,160.10

*this assumes savings will stop at 65, two years into the last three year lease

Total saving into a pension fund: £55,160.10. If the growth rate in that pension fund was 4% net of charges, this saving would increase to nearly £69,000.

13 According to the Finance and Leasing Association, 86.2% of private new car sales in the 12 months to September 2016 were bought on finance  
14 Calculation based on the cost of leasing a Vauxhall Zafira 1.6 CDTi at £300 per month (with a £1,800 deposit renewed every three years) compared against a used car of a similar make with a registration year of 2010 costing £6,683 (taken as an average of the first 10 cars to show on a leading third party website), with an upkeep of £1,000 per year (rising with inflation), with the cost spread over three years

2. Don’t let your children ‘default to debt’ to get through university:
With the rising costs associated with a university education, more and more students are starting their working lives owing significant amounts of money from their student loans.  According to Brewin Dolphin’s calculations, borrowing full loan amounts to cover tuition fees and maintenance for a three-year course at a university in England (outside London), would mean a child leaves university approximately £54,000 in debt.

Liz Alley explains: “Priority number one for parents looking to assist their children financially should be to help them avoid taking on large amounts of student debts. It’s not just the actual cost, but the opportunity cost to them too. Whilst the interest rate sounds low and manageable it compounds quickly into a scary number and meeting the monthly payments can prevent children from saving money for other things like a house deposit, and many will never pay their loans off.

“We have run a scenario based on a child leaving university with £54,000 of student debt who then goes on to enjoy a successful 30-year career that takes them to an annual salary of around £82,000. Even in this scenario it would take them 15 years to pay off just the accrued interest on their student debt; they would pay a total of £87,000 back over 30 years; and would still need the Government to cancel the outstanding balance of £44,000.  It’s a truly frightening scenario.”

The growing spectre of university debt

The following illustration shows the interest growth and repayments of £54,000 worth of student debt over a 30-year period. It assumes that the graduate in question has attended an English university outside London for three years and has borrowed the maximum amount available to them for tuition and maintenance. It also assumes that the student graduates and begins full-time employment, earning an average starting salary of £22,98415.  Annual wage growth of 2.30% is applied to earnings with an occasional pay rise assumed for promotions.  The interest rate is variable, depending on salary, where the rate is RPI (1.6%) when income is £21,000 or less, rising on a sliding scale up to RPI +3% (4.6%) when income is £41,000 or more.

Year (end)  Total loan amount  Annual salary  Annual repayment  Interest  Applicable interest rate + RPI of 1.6% 
1 £56,494.45 £22,984.00 £178.56 £985.53 1.75%
5 £59,951.26 £25,172.60 £375.53 £1,310.67 2.20%
10 £64,699.39 £38,332.80 £1,559.95 £2,620.29 4.15%
15 £68,428.07 £49,285.03 £2,545.65 £3,030.59 4.60%
20 £65,948.65 £65,713.38 £4,024.20 £2,848.52 4.60%
30 £43,735.93* £82,491.68 £5,534.25 £1,757.28 4.60%
Total     £87,259.31

*The outstanding balance is usually written off after 30 years.

15 HESA 2014-15 published October 2016

What can parents do?
  • Fund your child’s university education from existing savings or assets: For those who can afford to cover these costs from the disposal of assets, re-mortgaging a property or from savings, this may well be the preferred option although you should seek financial advice before proceeding with any of these suggestions.
  • Plan early and start saving now. Maxing out a JISA from age four will cover the cost: Investing in a JISA is one of the most tax efficient ways to put money aside for children. The allowance in 2016/17 is £4,080 per annum, or £340 per month. Paying this amount into a JISA from the age of four to 18 years old, assuming a conservative growth rate of 2% net of charges, will ensure that child has a fund of equivalent size to cover the total cost of their university education.
What is the opportunity cost of student debts for children?
  • Using the same example above, were that child to invest the equivalent amount of monthly repayments that they would make over a period of 15 years into the Government’s new Lifetime ISA (up to £4,000 invested each tax year with a government bonus of £1,000) this would help generate the following savings:
Years post graduation  Loan repayments contribute to Lifetime ISA  25% bonus added  Total amount  Projected LISA at 2% growth 
In year 1 178.56 44.64 223.20 227.66
In year 5 375.53 93.88 469.41 1,817.89
In year 10 1559.95 389.99 1949.94 11,331.49
In year 15 2545.65 636.41 3182.06 28,082.36

With this example, the child would be able to build up a fund of £28,082.36 to put towards their house deposit after 15 years. Assuming a 4% growth rate, the fund would be worth over £31,000 after 15 years.

Assuming this is used for a house deposit, the child could continue contributing into their LISA up until the age of 50 with the balance being put towards a pension fund.

Please note that there is a financial penalty if the money within a Lifetime ISA is used for anything other than the purchase of a first home or to help fund retirement16.

16 Further details can be found here:

3. Ageing parents – be prepared for the impact rising care costs could have on your own financial situation:

Nearly a quarter of 45-54 year olds in the UK are relying on an inheritance to improve their financial situation and/or help fund their retirement.  However, with greater longevity, some ageing parents will need to find ways of funding long-term care which can quickly reduce the size of an inheritance.

According to Paying for Care, a not-for-profit company, one can expect to pay around £29,250 a year on average in residential care costs in the UK, rising to over £39,300 a year if nursing care is necessary. The annual cost of a care home with nursing is highest in the South East at £47,840 and the lowest in Northern Ireland at £32,448.

It should be noted that currently, local authorities do not provide care services for those who have more than £23,250 in savings and property. From April 2020, this threshold will rise alongside the introduction of the cap on care costs.

Liz Alley explains: “With the cost of care so high, ageing parents may end up relying more on their families to help financially or see the size of the estate they planned to leave their children shrink or disappear. With almost a quarter of the sandwich generation relying on an inheritance, there could be a nasty surprise awaiting them.”

What can ageing parents do?

  • Use your cash to buy an Immediate Care Annuity (ICA): For those ageing parents who are in care home or about to move into one, they could consider an immediate care annuity, which like other annuities is a swap of a lump sum of money for a guaranteed income for life. This type of annuity is tax free if it is paid directly to the care provider, which could lead to significant cost savings. 

    It can be started immediately or can be deferred to reduce the cost. So, if you have earmarked the cash already, you can buy a deferred annuity cheaper than if you wait until the income is needed. 

    The cost of the annuity will depend on the income you need, your age, state of health, prevailing annuity rates and life expectancy.
  • Don’t leave it to chance, appoint a lasting power of attorney: This provides ageing parents with the ability to choose who will make financial decisions for them. In the absence of this, relatives would need to apply to court to do this, which can be both a lengthy and costly process. 

17 Laing & Buisson Care of Older People UK Market Report 2014/15


In part three of the Brewin Dolphin Family Wealth Report we will look at the younger generation’s financial challenges and solutions.

Notes to editors

 The Brewin Dolphin Family Wealth Report is a three-part series and this is part two. Further information can be found here:

Part one can be found here:

The third and final part will be published in the New Year.



For further information, please contact

Richard Janes   Justin Griffiths, Mazar Masud, Alex Rowbottom, Haifleigh Shivers
Senior Communications Manager
Brewin Dolphin
Tel: 020 3201 3343 Tel: 020 7250 1446
Email: Email:

About Brewin Dolphin

Brewin Dolphin is one of the UK's leading independent providers of discretionary wealth management. With £35.4 billion in funds under management, we offer award-winning personalised wealth management services that meet the varied needs of over 100,000 account holders, including individuals, charities, and pension funds.

We specialise in helping clients protect and grow their wealth by creating financial plans and investment portfolios that meet personal and professional ambitions and aspirations. Our services range from bespoke, discretionary investment management to retirement planning and tax-efficient investing. Our focus on discretionary investment management has led to significant growth in client funds and we now manage £28.9 billion on a discretionary basis.

In line with the premium we place on personal relationships, we’ve built a network of 29 offices across the UK, Channel Islands and Ireland, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients' needs at the core.

We are proud of our success and have the vision and ambition to grow into the UK's leading provider of discretionary wealth management. This year we were awarded a 5 star Defacto 2016 rating for DFM Managed Portfolio and in 2015, we won the City of London Wealth Management Awards for Best Discretionary Service Award 2015 and the Portfolio Adviser Gold Award for Best Cautious Portfolio Manager 2015 - Large Firm. We are committed to building on our strong track record and delivering continued value to both our clients and shareholders.

About Cebr

Centre for Economics and Business Research (Cebr) is an independent consultancy with a reputation for sound business advice based on thorough and insightful research. Since 1992, Cebr has been at the forefront of business and public interest research. They provide analysis, forecasts and strategic advice to major UK and multinational companies, financial institutions, government departments and agencies and trade bodies. For further information about Cebr please visit

About the research methodology

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 10951 adults. Fieldwork was undertaken between 10th - 16th August 2016.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).

Methodology: This survey has been conducted using an online interview administered to members of the YouGov Plc UK panel of 800,000+ individuals who have agreed to take part in surveys. Emails are sent to panellists selected at random from the base sample. The e-mail invites them to take part in a survey and provides a generic survey link. Once a panel member clicks on the link they are sent to the survey that they are most required for, according to the sample definition and quotas. (The sample definition could be "GB adult population" or a subset such as "GB adult females"). Invitations to surveys don’t expire and respondents can be sent to any available survey. The responding sample is weighted to the profile of the sample definition to provide a representative reporting sample. The profile is normally derived from census data or, if not available from the census, from industry accepted data.

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