Cash investments over many years have seen extremely low interest rates, making it hard for savers, who eschewed the investment markets following the crises to make any real returns through the traditional savings and cash Isa accounts.
Longevity has risen consistently in recent years and although this rate of increase is starting to soften, the average Baby Boomer coming to retirement can still expect to spend almost a quarter of a century in retirement. This is set to increase for future generations.
Good news, you may think. But that said, they are not necessarily spending a long and wealthy retirement; even though people are living longer, without careful planning their financial future could be bleak.
There is much talk of Baby Boomers having a wealthier retirement than those before or after them and of being better off than working people.
Recent research shows that Baby Boomers in the US are less than 30 per cent of the population but now own up to 80 per cent of the country’s assets, with many having a relatively “rich” retirement.
But for those following in future years, without careful planning and investing, the picture could be very different.
Recently, there has been a realisation by many retirement investors, particularly among those unwilling to tolerate the risk and volatility associated with being invested in the markets, that holding most of their wealth in cash may well be safe, but in real terms this is causing the value of their retirement savings to move in reverse.
As such, the level of savers investing in broader diversified funds has increased, with many seeing the value of a broad portfolio of investments.
This, in turn, has led to a proliferation of multi-asset investment solutions, creating a wide choice for investors seeking diversification, increasingly accessible within the expanding pool of personal investment and advised platforms.
The upcoming large rise in the number of people retiring is something the industry is aware of and many product providers and fund managers are adapting their offerings to accommodate this.
The asset management industry must continue to develop products and funds to cater for the growing sustainable income needs of both current and future retirees; many will need their retirement funds to last more than 25 years and will also have an expectation of the legacy they leave future generations.
This is a challenge that is likely to continue and will almost certainly be a key focus for asset managers, both now and in the future.
Steve Hunter is head of business development at Seneca Investment Managers