A motor home, a portfolio of buy-to-let, money for the grandchildren, a nippy sports car and a Thai bride were some of the things advisers gathered in Chepstow have seen their clients spend their pension cash on.
According to the adviser delegates at the FTAdviser Retirement Freedoms Forum in Chepstow today (13 October), they have an awful lot on their plates and one shared how they are trying to guide someone who has used Google as their pension adviser.
Presenting on how to recognise and juggle risks, and how to rethink the way in which clients can meet their various financial needs in retirement, Stuart Tragheim, distribution director of One Family, and co-presenter Collette Dunn, head of strategy for consultancy Milliman, told delegates that thinking in terms of buckets could help with pension planning.
They showed the Maslow’s Hierarchy of Needs pyramid, and adapted it to show how people think about financial planning.
“A natural way for people to think is in terms of layers,” Ms Dunn said.
She illustrated this with a new pyramid of needs: essential spend at the bottom, discretionary spend (such as a second car) in the middle and ‘legacy’ at the top, such as an inheritance.
“Sometimes this top section could be ‘shoot for the stars’, such as a pensioner’s desire to go to Borneo and see the orangutans”, she added, before both presenters explained how putting money into different buckets - cash, equities, bonds- could help cater to each of these hierarchies of spending.
The US and Australia both use such ‘bucketing’ measures and it could work here, Mr Tragheim pointed out.
He said: “People need a long and varied and flexible investment plan. Explaining it in terms of buckets can really help clients understand the risks.”
Last month Fidelity reported less than 6 per cent of defined contribution members have accessed their pension pots.
Maike Currie, associate director at Fidelity Personal Investing, said: “Despite all these concerns not many people have gone out and spent their entire pension.”
She added that half of those taking all the money as cash have pots that are less than £10,000, and then 60 per cent are DIY investors, and alongside this 30 per cent are DC members accessing their pots.
simoney.kyriakou@ft.com
