Covid-19 has set pensions equality back by decades, an expert has warned.
Professor Debora Price said any previous improvements to bridge the gender gap in pension provision have now been ruined as a result of the coronavirus pandemic.
On September 10, speaking at FTAdviser’s webinar The Long and Short of Longevity Risk, the professor of social gerontology at the University of Manchester said: “Everybody knows that women live longer than men, so there is this longevity effect.
“Women accumulate much less pension than men over their lives – so for any given age it’s about 20 per cent of men’s pension.
“We know that women earn less, they have different kinds of jobs, they have career breaks, they take on care, they have very disturbed earnings over their lives, and one of the main effects of Covid-19 that we are witnessing globally, but also very strongly in the UK, is that women’s lives are going to be much more disrupted.
“They are at much higher risk of redundancy, and any improvements that we were making towards pension equality for women is being set back possibly decades and we don’t know if there will be a recovery.”
The webinar, sponsored by Legal & General, will be available online for a month. Panellists also discussed the impact of talking to clients about life expectancy, and how advisers can derisk their business while protecting their clients from longevity risk.
During the discussions, Professor Price raised concerns surrounding the conflicts advisers face when financial planning for a couple, as women tend to outlive men, but men often hold the purse strings in a relationship.
She said: “Research suggests women are conditioned to have less inclination to be involved in finance and I think that’s a very challenging thing for financial advisers.
“The thing I am most interested in is how couples manage their finances together”.
“The research suggests that at all ages in the vast majority of couples these are things that are still male dominated. So when a financial adviser speaks to a couple, the underlying thing here is that these women are at very high risk of poverty in the event of divorce and widowhood. So when you’re sitting in front of a couple, who are you advising?”
The panel discussed anecdotal evidence suggesting a deep conflict of interest between what the woman, who might live to 100, 102 or 105, might need from the finances and what the man might want or need, which they agreed was very challenging.
Professor Price added: “I think that’s made much more challenging by pensions freedoms and Covid-19, which is already being referred to as ‘the widow maker’.”
Covid-19 impact
Joseph Lu, director of longevity science at Legal & General Retail Retirement Income, also said longevity planning has been negatively affected this year due to Covid deaths. He also suffered from Covid-19 in March and spent 10 days in bed recovering, which forced him to make a will.
He said: “For this year, the data is going to show a big change. It’s quite a disruptive year for life expectancy and mortality rates. We are seeing about 10 to 15 per cent higher deaths than we expected this year. So, this year’s figures will be an anomaly.
“Now for those of us who survive or who have not caught it, the consensus at the moment is that there will be some negative pressure on life expectancy largely from the results of delayed treatment. There is also the negative impact of the recession.”
Mr Lu also used the discussions to warn that national life expectancy data is not a suitable tool for planning.
He said: “National life expectancy data is not suitable for planning as it implies there is a one in two chance of outliving the figure.
“It doesn’t account for health, wealth and other important factors. If we would like a ‘90 per cent chance’ of achieving life-long financial security.
“For age 65, plan for living to 100, this means planning for 35 years. It is not just the length of life that matters –I would also want to think about health which in turn determines needs in retirement.”
These sentiments were echoed by Bruce Guthrie, professor of general practice at the University of Edinburgh, who argued that although statistics can help, they are not a guarantee.
He said: “Prediction tools can help focus a clinician’s mind and focus a patient’s mind, but these tools should not be a certainty.”
During the webinar, Mr Lu highlighted recent research by the Pensions and Lifetime Savings Association, which showed that a couple would need £29,100 each year to achieve a ‘moderate’ retirement, but £47,500 for a ‘comfortable’ retirement.
Mr Lu added that IFAs can help clients achieve their long-term aspirations by considering different sources of income and assets. This includes state pension, pension savings, investment return, properties, and final salary schemes.
The panel of experts also argued that IFAs need to think about the longevity of their own business so the advice they offer to clients does not end when the IFA retires or dies.
Business continuation
Keith Richards, chief executive of the Personal Finance Society, said: “What I am hearing a lot more now is that advisers are thinking: ‘I want my business to be around after I’ve gone, to carry on serving the long-term needs of the clients that I’ve built up.’
“So we are seeing a lot of effort going into firms that are now thinking about bringing new blood into their firms that allows them to develop those individuals to transfer their skill and knowledge. That means the firm that they started doesn’t end when they finish. The name above the door could be there in 100 years’ time.”
This sentiment was shared by Dan Russell, managing director of SimplyBiz Investment Services, who said: “There is now an emphasis on continuation over consolation. You’ve got a set of customers and you’re delivering for them in a certain way. Yes, the adviser may want to exit at some point, but what they are looking for is a way to put people on the same glide path, delivering the same type of advice and the same type of service, rather than this huge schism at one point of dropping that business and client bank into a very different-looking service and model that forces people into a different approach.”
Jon Scannell used the debate to highlight how IFAs need to think about the ‘four L’s’ – legacy, liquidity, lifestyle and longevity – when retirement planning.
The distribution director at Legal & General Retail Retirement Income said: “Quite clearly legacy is all about inheritance and what we leave to your families. Liquidity is the luxury income – that’s for special events, maybe the one-off holiday, or that unexpected event. Lifestyle is leisure and what we spend with our families.
“So, that is a regular and consistent income. And then longevity – this is the living income for food and household bills – the stuff you can’t do without and this is the area that there needs to be some type of certainty. A guarantee or an annuity here can provide peace of mind for some clients.”
Aamina Zafar is a freelance journalist
