More than a third of advisers believe helping clients plan for retirement is becoming increasingly complex, according to research.
Research from Scottish Widows, published today (September 6), found that out of 205 advisers, 80 per cent said their clients underestimated how much they would need to save for retirement and a further 56 per cent said they often saw clients underestimate how long they would live, making it hard to advise on longevity planning.
The average life expectancy in the UK is 87 years, yet the average adult expects to retire at 65 and live to just 82.
When advisers tell clients they’re underestimating their life expectancy and should increase their savings contributions, less than half (46 per cent) act on this advice.
One in five clients (22 per cent) choose to ignore the advice while 23 per cent think they will die earlier than the national average life expectancy.
Due to this, advisers said they are having to hold regular conversations with their clients to warn them that there is the risk they could run out of assets and advise them on how to mitigate this.
Three quarters of advisers (77 per cent) have clients who are worried that they will run out of pension savings while one in 10 advisers regularly meet retired clients who are concerned that their pension funds are running low.
Nearly half of clients believe they didn’t build up enough savings during their working life while 18 per cent blamed higher living costs in retirement.
One in 10 said their savings provided a lower income than expected.
Following the introduction of pension freedoms in 2015, many have chosen to access their tax-free cash pre-retirement. However, when approaching retirement age, some may no longer feel drawdown is the most suitable option for them, according to Scottish Widows.
Annuities remain an option for those seeking a guaranteed income for life, yet advisers said that more than a quarter of their clients (27 per cent) don’t consider these type of products.
Emma Watkins, director of annuities at Scottish Widows, said: “Life expectancy has grown substantially in the last 60 years and now one in 10 people will live to be 100. We know this is creating new challenges for advisers, as they are having to help clients who could be vastly misjudging the costs of a longer retirement.
“We believe it’s important for people approaching retirement to have access to a range of options on how to access their retirement savings, and that’s why we’ve remained committed to the annuities market while others have withdrawn over the last few years.”
amy.austin@ft.com
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