Your IndustryApr 22 2015

Ensuring clients plan for the longer term

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Andrew Tully of MGM says ensuring clients plan for the long-term is all about education and this is where advisers have a key role to play.

Andrew Tully of MGM says: “All the news around pension freedoms has been great at raising the profile of pensions and the need for clients to take an active role in planning for their future.

“I expect advisers are seeing huge demand for retirement planning advice and that is a great opportunity to educate people around the increasing length of retirement and the need to plan for 25 to 30 years in retirement rather than 10 to 15 years of previous generations.”

Behavioural economics suggests that if something is too ‘scary’ then people will simply block it out so Mark Stopard, head of product development at Partnership, says using a person’s ambitions is likely to work slightly better.

Indeed, he says asking people what they want to be doing in retirement, what sort of care home they want to go into and how they want to help their families when they are gone is a more positive approach.

When providing advice at-retirement, Mr Stopard says ‘framing’ the discussion can be important to ensure that clients realise that retirement is not a single constant state but a phase.

He says: “This will make it easier to move away from the discussion focusing on the immediate pot of money [for some the most they have ever had at any point in their lives] to look at what their income needs will be through time.”

In reality many people who have saved throughout their life for retirement are not going to squander the money overnight, says Andrew Tully, pensions technical director of MGM Advantage.

For those with pots of £30,000 and more, Mr Tully says cashing it all in at once is unlikely to be the best decision as they will hand more to the taxman than they need to.

Gradually drawing income over a period of time is the most tax efficient way of withdrawing money from a pension, he says.

Mr Tully says: “The general rule of thumb should be, if you don’t need to the money leave it in the pension as it is the most tax efficient place for funds to grow, and be passed onto family.”