British households, largely due to the triumph of auto-enrolment, are saving more for their retirement, while property wealth is also going up.
The latest stats from the ONS show that the total net wealth of private households in Great Britain was £14.6 trillion in April 2016 to March 2018, an increase of 13 per cent in real terms compared to the previous two years.
Good news for financial services, and great news for UK homeowners.
As the average length of our lives has increased, so has the amount of money required to maintain a consistent quality of lifeHowever, the challenge still facing many retirees is how to best utilise their wealth to make it last the rest of their non-working lives.
For most people, that could mean funding their retirement for 20, 30, or even 40 years.
This can result in many retirees simply choosing not to engage and defaulting into financial products that do not best meet their needs.
The reality is that as the average length of our lives has increased, so has the amount of money required to maintain a consistent quality of life.
What is more, retirees do not have a crystal ball and might find themselves inadequately prepared for how much their needs might suddenly change over the course of this new chapter.
Finances once reserved for travel and holidaying might unexpectedly be required to cover the cost of later-life care, or helping grandchildren get a foot onto the property ladder.
The fact is that people will have different needs at different times – many of which may be suited to a different form of finance.
This is precisely why there is no ‘single’ solution to later life income, and why most people will need to consider a layered retirement plan which uses a combination of annuities, drawdown and the state pension.
As our society continues to evolve and adapt to increasingly lengthy lifespans, the financial services industry, together with the adviser community, must be increasingly resourceful with how they help clients use the assets at their disposal.
Accessing housing wealth, and the proper use of equity release products, is an excellent example of this innovation in action.
Britain’s over-55s own £1.8 trillion of housing wealth, and that figure is set to double by 2036.
This equity – which some people have spent most of their working lives trying to make their own – could help thousands of people fund their retirement.
The traditional notion that the family home should be left ‘untouched’ or passed on in ‘perfect’ condition is perhaps understandable.
For many, a family home is more than a financial asset.
It is the emotional centrepiece that binds multiple generations.
However, this mindset does not help retirees in need of immediate and significant income.
Releasing housing wealth can make a real difference to homeowners in the first decade of their retirement, as well as the younger generation in need of financial help (at a time where money can make a real difference to their futures).
The lack of understanding around the use of such at-retirements products is just one of the many challenges the retail retirement industry faces.
It is exactly why, as an industry, we need to make retirement planning more accessible and relateable to customers, demonstrating a genuine appreciation for the challenges that they face.
Our job must surely be to meet clients halfway, helping them navigate what they want their retirement to look like, and matching it against what the financial realities of their situation can afford.
This means delivering tailored advice throughout retirement. Advice that is based on life goals, not product packs.
We need to start treating assets more like assets and treating people more like people.
This, combined with a genuine drive to elevate the quality of retirement planning education, will enable more retirees to make informed decisions in later life, so that they are able to enjoy the colourful retirement they have always dreamt of.
Emma Byron is managing director at Legal & General Retail Retirement Income
