However, from a financial perspective, the pain is unfortunately yet to be fully felt and will likely have a far longer-lasting effect on clients, particularly on their retirement plans.
Many are finding themselves in situations not previously encountered and as a result will need advice and guidance to help them through the difficult times and ensure they come out of it in the best shape possible.
It is not surprising that many clients are retiring earlier than planned in the wake of the pandemicIndeed, we have noticed three real shifts in the behaviour of people reaching retirement, but each brings opportunities for advisers to ensure they make the most of their new situation.
The early retirees
After a challenging year for businesses and individuals, it is not surprising that many clients are retiring earlier than planned in the wake of the pandemic.
Whether impacted by redundancy or illness, or whether changes to work and family circumstances have brought forward the need to retire, these clients need immediate advice to help them put their pension plans on fast-forward.
There can be a wide range of issues experienced by clients in this circumstance, from a sudden negative cash flow to government support being withdrawn and potential financial help no longer being available.
These clients’ attitude to risk will also change and they will now need advice on how to make their pension pot last longer.
Not only that but if they ever want to return to the workplace then the complexities around the Money Purchase Annual Allowance will need to be explained and managed.
As a result, these people will need an adviser to ensure they are invested in a flexible pension that gives them a range of withdrawal and investment functionality to manage these risks.
This is also a good opportunity to use some of the softer skills and help clients with the emotional fallout of redundancy to build trust. Recommending books, podcasts or services that can help with their self-worth can go a long way in fortifying adviser-client relationships.
The retirement delayers
For thousands of clients, the pandemic may mean retirement has been put on hold, either because they would prefer to continue working as their lifestyle plans have been thwarted, or because the disruption of the pandemic has made them indispensable in their profession.
But continuing to work for longer means the client should have extra cash not only being invested into their pension, but also they will be taking advantage of savings made by working from home or through reduced discretionary spending.
However, what these clients may not be aware of is how these extra savings could make a difference. Much of it will also be put into cash savings yielding next to nothing or put into funds not necessarily suitable for their circumstances.
For advisers it is crucial they make sure clients understand how this extra money and time, given retirement is now delayed, can make a difference and put plans in place to provide them with a fully flexible pension arrangement to make the most of retirement when it eventually comes.
The newly motivated pension planners
Most people know their pension is something they need to sort out, but human nature and a busy life means it is all too easy to put off.
However, with the pandemic forcing everyone to stop and think about what is important, advisers are seeing an increase in clients with new motivation to sort out their retirement plans. And with the end of tax year coming up, now is the time to be putting those plans in place.
Again, this cohort is likely to have saved considerable sums of money with the move to working from home or not spending as much. As a result, they need help on what to do with this money, given retirement planning is now front of mind.
With an engaged client, this is effectively a dream scenario for a financial planner and the perfect time to track down old pensions and assess their current investment choices before pulling it all together into one, easy to follow financial plan.
Written by Ian Browne, pensions expert at Quilter
