How to help clients ensure a sustainable pension income

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Financial planning must evolve to help clients maintain a sustainable level of income in retirement, experts have claimed.

Keith Richards, chief executive of the Personal Finance Society, said: "The advice sector has responded very well and positively to the situation thrust upon them.

"Advisers will generally look at the longer term. Many have told me 100 is the new 80 when they are loking to plan for how long someone will need income for."

But Mr Richards said since advisers will potentially be working with clients much longer into their later years, seeking to provide a regular, sustainable income stream for them, this brings new challenges for advisers, such as dealing with older clients who may start to lose their cognitive functions.

It is important to really understand what a client wants to do with their income and make sure they are responsible with it. James Dingwall

He comments: "Soft skills are becoming more important now, for example, with cognitive challenges".

This means advisers will have to pay more attention to how they interact with a client over a long-term relationship, and ensuring the client does not run out of money later on in life when they may need it most.

James Dingwall, chief executive of Thistle Initiatives, said: "This is a very key point for an advisers. It is important to really understand what a client wants to do with their income and make sure they are responsible with it.

"It's no surprise that people look at the pot of money that comes through and do various things with it, such as holidays or going shopping, but it is important for an adviser to sit down with a client and to ensure they can build a sustainable income for that client, so the client can achieve their goals."

Moreover, it is not just about sitting down on day one and drawing up a plan, but helping the client to plan out the rest of their lives and their income requirements, Mr Dingwall added.

Mr Richards commented it was still a "big challenge" that people underestimate how long they will live and therefore will run out of money.

But it is also incumbent on advisers to make sure the advice they give to clients is absolutely top-standard, Mr Dingwall said.

In January this year, the Financial Conduct Authority (FCA) issued further guidance on pensions transfer advice, in which the regulator cited some concerns about pensions advice. Mr Dingwall commented: "Those firms not meeting those standards now will see a significant impact on their business.

"[Good advice] is about understanding the client base, not just about at-retirement but about sitting down with the client and personalising that advice to that client."