As a result, it is easy to see why a product that can offer potential for investment gains could be useful for these clients.
Simply put, many people are living longer in retirement than previous generations; the average 65-year-old UK male can expect to live to 86, with a 1 in 10 chance of living until they are 97.
For women, this is 88 and 99. As a result, more of us will likely need to fund old age care at some point: roughly one in five men and one in three women over 65 will need expensive residential care during their lifetime.
However, the difficulty from a financial planner’s perspective is that it is impossible to predict when and for how long various demands on a retiree’s income will emerge, which means that flexibility is crucial.
A holistic approach
For all these reasons, a single view of retirement – and the notion of there being any ‘one product for life’ – is dead.
Holistic retirement planning requires us to access the multitude of solutions available and then layer them so that we can build a flexible and secure retirement plan that will deliver the retirement that clients aspire to – and no doubt deserve.
For example, various types of annuities, which guarantee a regular retirement income for life, can be used alongside the likes of state and company pensions at different stages of retirement.
These include enhanced annuities, which often pay higher annual payments due to the policyholder having a shorter life expectancy.
But beyond pension products, individuals are also increasingly seeking to unlock equity from their homes to help fund their retirement.
Figures from the Equity Release Council, the trade body for lifetime mortgage providers, showed that £1.85bn of housing wealth was accessed in the first half of this year, echoing the amount unlocked in the same period last year.
Cash released from the equity in people’s homes is commonly being used to fund things like holidays or treating loved ones.
This injection of funds can often work well alongside an annuity, whose guaranteed level of income can help to cover fixed costs such as living expenses.
Given Britain’s over-55s hold roughly £1 trillion in housing wealth, it is unsurprising that equity release is fast filling the gap being left by the largely historic defined benefit pension. After all, saving enough for what could be three decades of retirement without a final salary scheme is particularly difficult for many savers.
A new blend
We know that retirement has changed and that it is no longer the one-size fits all that it was just a generation ago.
This change means that a different approach to advice, and the way in which providers operate, is needed.