“This is why we strongly support the idea of a mid-life MOT, ideally when people are in their forties, which gives a realistic picture of their future retirement as well as the time to do something about it," Ms Tait explains.
Helping clients understand the essentials
Mr Chan says many people are victims of “delayed gratification" when it comes to saving.
He describes this as the act of people not being able to see the benefits of being financially disciplined with savings and perhaps incorrectly believing they are too far behind to start saving.
Mr Chan says this means that people often delay their savings into pensions and investments, losing out on compound growth over the years and making it more expensive to “catch up” when they are older.
Ms Tait says clients need financial advice to navigate their way through the many decisions they need to make regarding the level of income they need.
She stresses that guidance is needed to also assess the most tax-efficient way of accessing the income and ensure it lasts for as long as it needs to.
Mr Garg points out that millennials are in greater need of financial guidance as they are more likely to be renting homes compared to previous generations, potentially leaving them less money to save for retirement.
He adds: “Therefore, it is important that people have more guidance and understanding in the ways they can boost their retirement. This can include state benefits, diversifying and maximising employer’s contributions. Once there is a better understanding, people will likely find it easier.”
Martin Jarvis, associate consultant at Mattioli Woods warns that low annuity rates can force individuals into flexi-access drawdown and can lead to pots being prematurely exhausted should individuals not get proper financial advice.
He highlights how some individuals may simply need assistance understanding the “myriad” of different rules that have developed over time.
He adds: “From how much tax free cash is available, to how to draw an income, as well as the type of pension they may have - defined contribution or final salary – which may have also undergone rule changes unbeknown to the client. This all becomes part of a long term plan to meet a client’s needs.”