IFAs must involve both parties in pension planning: Brown Shipley

Speaking to FTAdviser In Focus, Rebecca Williams, head of wealth planning at Brown Shipley, said it was important that advisers sought to involve both partners in conversations about pension planning, whether the couple are married, in a civil partnership or even cohabiting. 

According to Williams, a failure to do so could lead to one of the parties being less financially secure in retirement - and too often this could be the woman in the relationship, given other factors such as the gender pay gap and fewer years in work.

FTAdviser: Why do women in particular need to pay more attention to their pension earlier on in their working lives?

Rebecca Williams: For many women the pattern of regular pension contributions is typically interrupted by taking time out for children. This tends to coincide with years where earning potential and the ability to make contributions would otherwise be increasing.

Retirement often prompts a conversation about the amount of investment risk being taken.

Women who return to work part time or not at all will find that the ability to save into their pension is reduced, especially with the added pressure of childcare costs.

For women who return to work on a lower salary, it will also mean that employer pension contributions are reduced. As a general rule, everyone should pay attention to their pension as early as possible in their working life - the earlier you can start contributing the better.

FTA: What can advisers do to help couples speak more openly - for example traditionally the man has had the relationship with the financial adviser. How can advisers make sure that the woman is in the conversation, even if she is not the main breadwinner?”

RW: It is so important that both partners are involved in conversations about finances and planning for the future.

Small things make all the difference – including both partners on correspondence, making sure meetings are held at convenient times to fit around other responsibilities, actively seeking to understand what is important to female clients and really listening so you can adapt your style and present information in different ways.

Advisers must understand what suits their clients - some like numbers, others are more visual.

At the core, it is about making the effort to build a relationship with female clients, as what is important to them will often be different to what matters most to their male counterpart.

FTA: What investments and pensions might the couples consider together with their adviser?

RW: A review of their overall financial position, including pensions and investments, will ensure that their finances continue to be structured appropriately for retirement.

Retirement often prompts a conversation about the amount of investment risk being taken, especially if clients will rely on their investments and pension to provide income.

A part of this conversation is making sure all available tax reliefs and allowances are being used effectively and between spouses/civil partners, and assets are owned in the most tax-efficient way. 

FTA: Do people understand what income they need in retirement? How will this change?

RW: Many people enjoy the opportunity to travel and pursue active hobbies in the early years of retirement and spending tends to be higher to reflect this.

Although spending on active pursuits may fall in later years there may be a need for care, either at home or residential, which presents a significant income need.

It is about making the effort to build a relationship with female clients.

A cash flow model is an excellent method of looking at spending over the long term in the context of the client's overall financial position.   

FTA: Should clients be repaying debt?

RW: Maintaining debt requires careful consideration after earnings cease. They should consider how comfortable they are with maintaining debt in retirement - for how long and at what level? Where will income to repay the debt come from? 

FTA: Do they need to understand risk?

RW: Planning for retirement should include a reappraisal of investment risk tolerance – has your attitude to investment risk changed? Can you afford to take risk or are you relying on the assets you have to support you for the rest of your life? How would your lifestyle be affected if your investments and pension fell in value? 

FTA: Often we focus on investing for income, but what else do clients need to protect their family in retirement?

RW: Life assurance provided through an employer will end at retirement. Consideration should be given to the particular family situation and if ongoing cover is required.

Life assurance also forms part of discussions about estate planning and providing a capital sum to pay a potential inheritance tax liability on death.