Don’t be shy about retirement

Graeme Ballantyne, business consultancy manager at Prudential, explains how increased focus on retirement can significantly develop your business

Retirement isn’t a single point in life – it’s an extended journey of many different stages, and an individual’s needs may well vary greatly on the route from pillar to post. So it’s always worth reflecting on how well your proposition benefits your clients at the different stages in their later life. At the same time, it’s worth assessing how well you’re communicating this offering both to new and existing clients.

The Retirement Journey

In this diagram the three traditional stages of retirement – Pre, At and In – have been expanded into six segments to focus on.

 

There is a market for the under 50s where they should be encouraged to save for their retirement. However, for the purposes of this article I will focus on the over 50s as they could be more likely to buy into your ongoing proposition.

Here are the six segments in more detail:

Some way off

These clients are likely to be over 50 and have between 10-15 years still to go until their selected retirement date (SRD) or the age when they can draw their state pension.

What might you be helping them think through?

• The age at which they may want to retire
• Deciding how much income they might need to live a comfortable life
• Understanding the amount of savings required to create the income they want/need
• Building confidence that their money will not run out if they take action to save more now
• Reviewing existing retirement plans and identifying any savings gaps
• Understanding the different options open to them
• Maximising savings and minimising tax
• Thinking about protecting some of their savings they already have

You may be using different tools to help this conversation, including retirement modellers or cash flow planners as well as tax and pension calculators.

However, the most important outcome will be the plan you develop with them to ensure they start to take their retirement more seriously. More focus at this stage increases the amount of choice the client has further along the journey.

Nearly there

Typically, these clients are around 5 years from their SRD and are more interested in their retirement options.

What might you be helping them think through?

• Maximising the contributions they can make to a pension
• Modelling different income requirements in retirement
• Maximising death benefits
• Utilising all tax allowances
• Increasing confidence that their money will not run out during retirement
• Taking advantage of your knowledge to factor in changing circumstances e.g. redundancy, inheritance etc.

At this stage you are optimising the plan to take full advantage of any unused tax allowances and minimising the investment risk, as well as protecting the assets already built up.

Choices & decisions

These clients are in the process of retiring. There may be fewer people who have a single date when they retire in future. They may go part-time, or take some benefits and keep working, or they may continue to work longer through choice or need.

What might you be helping them to think through?

• Whether to take some tax free cash or not
• Implications of part time work or one partner continuing to work
• Starting to take income from savings tax efficiently
• Building in flexibility around future income levels
• Maximising death benefits and provision for ill-health
• Ensuring money will not run out
• Minimising investment risk
• Maximising tax efficiency around passing wealth to the next generation
• Making provision for later life

The client is seeing their plan come to life in terms of perhaps stopping work, spending more time together with their spouse or partner or even freeing time to spend with their family. 

Greater freedom

At this stage your client is probably fully retired and receiving their state pension as well as generating income from their pension savings.

What might you be helping them think through?

• Keeping the plan fit for purpose
• Incorporating state benefits
• Taking income tax efficiently
• Ensuring money doesn’t run out
• Planning any future expenditure
• Thinking about when to delegate financial control
• Planning funeral expenses
• Making plans to pass on wealth tax efficiently

Hopefully they will be enjoying life doing the things they had planned to do, safe in the knowledge they have their finances under control and they will not run out of money if they follow the agreed spending patterns.

Slowing down

These clients could be slowing down for a variety of different reasons, ranging from health issues to having done all the things they wanted to do. They may be spending more time at home and have less need for income. The key point is that their life is changing and their financial needs are changing too. Many of the things they buy more frequently have higher levels of inflation, like utilities and you need to take account of these things in their financial plan.

What might you be helping them think through?

• Reviewing income and ensuring it still won’t run out
• Taking income tax efficiently
• Finalising tax efficient estate planning
• Allowing for potential care costs
• Planning for later life

There is also potentially the need to start involving their family, if they have any, in some of their financial plans. 

Later life

These clients may have more health issues and therefore will probably be more dependent on others. They may also have more need for advice if they are less financially confident.

What might you be helping them think through?

• Ensuring any increased income needs can be met from savings
• Finalising and implementing any planning choices around care
• Seeing the positive impact of legacy planning by passing wealth on to their family.

You may now be dealing with whoever has delegated responsibility for dealing with your client’s finances as their plan draws to a conclusion.

Understanding your client bank

Consider dividing your client bank into the six segments.

Ask yourself:

How do your clients know you can help them with each stage of their life?

If I looked at your website or other client facing materials today, what evidence would I see of your experience in helping clients on their retirement journey?

Reflect on how well your proposition and communication with clients fits their needs both now and in the future. An additional benefit for you is that it will give you a sense of how your ongoing income may change over the next 5-15 years. This helps you plan your approach to building replacement income for yourself or your firm.

Finally

Through your knowledge and skill in building and updating each client’s plan, you will help them achieve the most income possible in retirement. This would be based on their ability to save, aligned to their risk profile, while helping them utilise their full tax allowances.

This is surely what most clients over 50 are looking for help with. Will they find it with you?

 

Prudential offers a number of guides that can help you develop your business and professional connections. You’ll find all of them here.