Defaqto’s latest case study urges advisers to plan for the fact while life expectancy is increasing, healthy life expectancy is not necessarily increasing at the same rate.
The report, written by Gillian Cardy, insight consultant (wealth) at Defaqto, stated that healthy life expectancy is suprisingly low and advisers may need to gently challenge whether clients’ plans to continue to work in old age are realistic.
The report stated current lifestyles are having a negative effect on population health with 66 per cent of the adult population not meeting recommended minimum levels of physical activity.
The report stated: “Investors will be approaching retirement, typically having undertaken inadequate preparation.
“They may be over-optimistic about the income their fund can generate, whilst also being unaware of the potential for impaired or enhanced rates, if available, to improve their retirement income.”
Ms Cardy said numerous studies continue to demonstrate clients value secure income in retirement, but they are also interested in benefiting from many of the flexibilities introduced by last year’s pension reforms.
She said: “The practical issue that advisers have to confront is how to offer such advice in a cost effective way, especially for those with more modest pension funds who would typically have been advised to purchase annuities and for whom the cost of more bespoke advice strategies may have been prohibitive.”
Paul Lindfield, director of wealth management at Manchester-based Sedulo Wealth Management, said: “We’ve seen a lot of hybrid products come into the market - things like annuities under a drawdown wrapper.
“People want the advantages of the pension freedoms without the inherent risk.
“This is the way the annuity market has developed, to have products around this, but the drawdown market remains pretty much the same.”