INVESTMENTS & PENSIONS
Being the top driver of demand indicates a growing awareness from clients of the possibility of living longer , and the risk of them outliving their savings . This aligns with the most common concern raised by clients – running out of money before they die .
Clients want their money to last . ‘ Using savings to create a sustainable lifetime income while preserving all or part of the capital ’ is a key objective for them , according to 83 % of advisers . However , this is a significant decrease from the 96 % of advisers who noted this as a key objective five years ago . This might suggest competing priorities between clients wanting to prepare for living longer , but also feeling pressure from the current economic environment .
2 . The current economic environment ( 58 %)
The economic environment was the top factor of demand for retirement advice in the 2023 report – likely to be driven by the cost of living and market volatility . In this year ’ s report , the economy is still a top two concern for clients , with rising interest rates and inflation influencing discussions .
Advisers saw an increase in their clients staying in work longer , adjusting withdrawal rates and adjusting wealth transfer plans to cope with the current economic conditions . They also reported a significant increase in the number of clients withdrawing their entire retirement savings in a short timeframe . This year , 24 % noted this , compared with only 15 % in 2023 and 8 % in 2020 . While it ’ s possible that this is due to small pot withdrawals , it ’ s a trend that will be watched closely in line with the cost of living .
Also noted is an increasing challenge to advisers from clients on the performance of cash holdings versus other asset classes . This follows two consecutive years of higher cash rates . 41 % of advisers said the allocation of cash in their clients ’ portfolios had increased in the last 12 months – although 55 % said this hadn ’ t changed . A growing proportion of advisers expected the allocation of cash to decrease in the next 12 months .
3 . Current tax and allowances ( 49 %)
Changes to pension rules announced in 2023 – coming into effect in 2024 – looks to have also brought clients to advisers . The abolition of the Lifetime Allowance has created many new and evolving considerations . The change in National Insurance rates and the 2023 increase to the Money Purchase Annual Allowance might also be topics your clients are still keen to discuss .
The top client aspirations include maintaining the same standards of living in retirement and assisting their next generations with their finances . With this , comes an opportunity to support clients with optimising their withdrawals across tax wrappers . And providing more tax-efficient options for passing down wealth .
WHAT ’ S NEXT FOR RETIREMENT ADVICE ?
The findings from this year ’ s report show that retirement advice is still a cornerstone of financial planning . The changes to some of the key drivers for advice demonstrate the value your advice could provide in a variety of circumstances . Clients are most in fear of running out of money , underpinned by an ageing population and the cost of living crisis . Sound financial advice could be the difference between a modest or more comfortable standard of living at retirement .
With ongoing cost of living challenges , there are concerns from advisers about the affordability of financial advice . While changing rules and regulations might add more complexity and costs for your business . A general election could also further impact market volatility and add more pressure from your clients as to the performance of investments .
READ THE FULL REPORT FOR MORE INSIGHTS
The full report ‘ Managing Lifetime Wealth : retirement planning in the UK ’ goes into further detail of the retirement advice landscape in the UK . Discover the impact of Consumer Duty on advice and the most significant foreseeable harms facing clients in retirement .
Find out what advisers want to see from politicians following the general election – and what they feel are their biggest challenges for the financial planning industry in the years ahead .
References 1Life expectancy calculator . Using the calculator shows a 1 in 4 chance of babies born today living to 99 ( female ) and 97 ( male ). Data source , Office for National Statistics , accessed January 2024 .
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