Retirement is dead – long live protection?

Why the changing face of retirement creates more opportunities for protection

According to our recent report on ‘the death of retirement’, changes in workplace pension provision mean that coming generations of retirees could have a radically different experience of retirement from their parents.

Consider this: the average contribution rate into an old-style final salary pension was around 20 per cent of total wages. However, the statutory minimum for a new automatic enrolment scheme is barely one third of this level.

Unless today’s workers begin to save significantly more for later life, many will find that the quality of life they saw their parents enjoy will be unattainable for them, unless they work well beyond traditional retirement ages. On the plus side, this news could have a positive impact on protection sales.


The effect of a longer working life

The government has effectively put an end to the default retirement age of 65, allowing employees to choose when they want to retire. And though it might be the intention for many to retire between the ages of 60 and 65, the reality might be they have to carry on working until aged 70 or older – assuming of course that this is even possible.

Key findings of the report show that someone on average earnings targeting a total pension of two thirds of their pre-retirement income, securing inflation protection and provision for a widow/widower, would need to work to 77 if they contribute only at the statutory minimum level.  For an index-linked pension with no survivor benefits, they would need to work to 76, and for a level pension they would need to work to 73.

With this need to contribute to a pension for longer and the increased availability of mortgages to older clients with a 25+ year term, today’s working population may have to adjust their longer-term plans.


A positive impact for protection

An ageing, still-working population could provide more opportunities for you to sell protection today. By making your client aware they could be working for some time after the age of 60, you can emphasise the importance of protecting their lifestyle.

It is generally accepted that the likelihood of contracting a critical illness, such as cancer, increases with age. For many people, continuing to work to these much higher ages may simply be beyond their physical capability. How would they cope if they could no longer work, yet still had mortgage payments to make? And if they couldn’t make payments to their pension, how would this period of sickness affect their retirement?

To many, retirement may seem a long way off.  But by protecting their lifestyle now, with a sufficiently long term, you might be able to give them some peace of mind as they head toward retirement. Yes, they’ll be paying for their plan over a longer period, but they’ll benefit from having some cover now too.

By highlighting the likelihood of a longer working life, and its impact, you are adding value to the protection sale and showing the real benefit of buying protection with advice.

Source –

Read the full report ‘the death of retirement’

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