Getting clients' mid-life priorities right

Financially, too, our outlook shifts as we get older. Rather than doing chores for extra pocket money or blowing our first wage packet on a night out, the more mature of us save for bigger ticket items – cars, holidays, children’s weddings – and manage our day-to-day finances carefully.

Pensions, however, is one area in which mid-lifers are not much more advanced than younger cohorts.

According to the Pensions Policy Institute, just 54 per cent of women and 58 per cent of men aged between 40 and 49 were saving in an occupational or private pension in 2017. Between the age of 50 and 65, just 53 per cent were doing the same.

Women and men in their 30s were only just behind, with 47 per cent and 52 per cent saving for their retirement, respectively. 

Advisers can also help mid-lifers see the tax benefits of planning for retirement.Paul McNamara

This means almost half of those loosely classed as “middle-aged” seem to have chosen to rely on the state pension – currently around £122 a week – to maintain their standard of living after retirement.

But have these mid-lifers really made that choice, or, as so often happens, has life got in the way and they have prioritised differently?

Jason Witcombe, chartered financial planner at Progeny Wealth, recognises that saving throughout middle age can be difficult. 

“Many of our clients face having to support their children as well as cover the care-home fees of their parents as the reality of the sandwich generation takes hold,” says Mr Witcombe.

Retirement poverty

With essential costs like these, it is easy to see how pensions, the benefit of which will only become clear in a decade or so, can fade into the background.

But this oversight can mean they miss vital years of contributions that most are unlikely to be able to make up, especially with these extra financial burdens that may have stopped them in the first place. 

Keith Richards, chief executive of the Personal Finance Society, explains: “With average life expectancy in the UK projected to hit 90 in the coming decades and more centenarians than at any point in history, it is imperative that people take the necessary steps to avoid a retirement of poverty – or face re-entering the workforce to make ends meet.”

Mr Richards says the same care and consideration should apply to planning for financial retirement as it does for any other major personal or professional life event, and luckily, the adviser community was ready to assist.

Anthony Carty, group financial planning and business development director at the Clifton Asset Management Group, says advisers using cash flow modelling were helping individuals more clearly understand the financial impact of retirement.

Mr Carty notes: “This sounds pretty dry, but it really does bring to life the extent to which you are either on track, ahead or (as most likely will be the case) behind one’s retirement plans.

"Once a base plan has been established, then this can be measured and updated year on year – the result hopefully being more of a soft landing than the cliff edge scenario of having no plan at all.”

Using tools like these, which are increasingly technologically advanced, can help mid-lifers take a holistic view of their financial future, including incomes and outgoings they may have overlooked.

Paul McNamara, chief executive of Evalue, suggests: “Advisers can also help mid-lifers see the tax benefits of planning for retirement. When you get to a certain age, you’re likely to be earning more money.

"Advisers play a key role in helping people not only understand the complexity of their pension, but also the taxation benefits of contributing into a pension.”

Re-energising mid-lifers

This tax issue is, for many, an even more daunting prospect than saving more – or anything at all – for retirement, but the increasing availability of tools for advisers should help ease the fear of tackling them.

Mr Witcombe points out: “It is crucial at this age that you start maximising all the tax allowances on offer. For example, if you have elderly parents, ensure there is a sufficient plan in place regarding your potential future inheritance, especially in cases where you are contributing to their care.”

Using these tools may help to gently reset clients’ priorities by combining data with personalised video and audio to help engagement and understanding of pension savings, rather than administering a short, sharp shock, says Mr McNamara.

Advisers have a key part to play in re-energising this group to plan, according to Mr Carty. 

“The easiest thing for most people to do when thinking about their retirement – or putting it another way – ‘getting old’ – is just to simply ignore it and deal with planning for the next holiday in Cornwall or the Caribbean,” he adds.

“However, retirement is likely to be the longest holiday of your life – and it will be more Butlins (nothing wrong with Hi-de-Hi) than Barbados if you don’t plan for it.”

Elizabeth Pfeuti is a freelance financial journalist