Article by Phil
Pensioner financial advice – facts and figures
Some pensioner financial advice facts and figures have been produced by research from LCP and the University of Bath which confirmed some trends in retirement which we see regularly. These included:
- People retiring without a final salary pension tend to rely on the state pension for their income. This highlights the value of final salary schemes.
- Homeowners tend to spend more in retirement particularly when they first retire. Compared with those renting.
- Spending on luxury items reduces as people get older, especially beyond 80.
The research will help the government’s latest review into improvements to pension financial advice information options at retirement. Known as the targeted support framework.
Under the new plans pension companies are likely to be allowed to send marketing information to clients prior to retirement. This will include information about their retirement products and options. This will not be an advised approach. Instead, it will offer information meaning that the clients will be making their own decisions. It’s not clear yet at this stage what happens if clients make poor decisions based on the marketing material sent, given that they aren’t being advised. This is the thorny issue.
Currently customers only receive marketing material if they opt in to receive it, which most people don’t do.
The government wants to help people manage their pensions more efficiently. Currently 70% of people withdraw all their pension funds in cash and don’t use an adviser. Which is unlikely to be the most tax efficient route, or to be part of a long-term investment plan.
How much do you need to retire for a comfortable pension
According to the latest figures from Standard Life, the following pension pots are required:
- Single pensioners need £55,000 to achieve the minimum standards of living in retirement.
- They need £439,000 to achieve a moderate standard of living. Compared with couples who only need £214,000.
- And a single pensioner would need £709,000 to achieve a comfortable standard of living, compared to £398,000 for a couple.
These are the living standards according to the Pension and Lifetime Savings Association PLSA).
- 40% of people are not on track for a minimum standard of living in retirement.
- Another 1.6 million are at risk of not meeting the minimum standard due to rising prices.
- 42% of young people are also at risk of retirement poverty.
- 75% of the UK’s 4.4 million self-employed are not likely to meet the minimum retirement needs.
This is a huge problem for the future.
Pension savings not meeting retirement needs
Research by Retirement Review found that most workers in the UK are seriously underestimating what they need to retire. The figures above reflect this, with the average worker thinking that a £250,000 pension pot would fund £30,000 a year in retirement. In reality that would last just over 10 years. With people retiring at 65 on average that will leave lots of older pensioners in poverty. More potentially than we currently have today.
Currently less than half of today’s retirees aged between 65 and 75 think that their pensions will be enough to last their lifetime, according to Aviva. Only 25% are confident that their pension savings will last.
Over 80% felt that having a guaranteed income made them feel more secure. Especially older retirees.
Many pensioners will need to rely on their property wealth in order to sustain their retirement income.
Hargreaves Lansdown found that:
- 20% of people had no idea when they would be able to retire
- 50% thought it might be sometime between 60 and 70.
- 14% thought they would be older than 70 and 16% thought they would be able to retire at 60.
- According to HMRC younger people in their 20’s are only saving an average of 2.5% of their salaries into pensions. That is not enough.
Getting some pensioner financial advice would help you to understand when you will be able to retire.
Pension Dashboard help update
The long-term Pension Dashboard project is moving into a testing phase this summer. 35 pension companies are sharing their data with Money Helper. The idea is to allow people to be able to see all their pensions in one place online.
Currently only 1 in 35 people look for their pension information on a regular basis. Compared with 8 in 10 who use online Banking. More promotion of pensioner financial advice is clearly required. But only once the Pensions Dashboard finally launches.
The number of pension transfers have increased over the last two months, having been falling steadily over the last few years. The average transfer value is currently £140,000. Back in 2021 it was as high as £270,000. That was a reflection of a wave of final salary pension transfers which have slowed down recently.
