MCI adds more2life to panel
Stuart Wilson is corporate marketing director at more2life
The ongoing coronavirus crisis has disrupted the financial security of millions of people across the UK – from the young who have felt the profound impact of job losses, through to older generations who, in many cases, have been powerless against the effects of ongoing negligible savings rates and wavering investment fund performance.
For those approaching retirement age, this has been an especially challenging time. Some have been forced to enter retirement earlier than planned due to redundancy, whilst others will begin the next phase of their life with less saved than they originally expected.
MCI adds more2life to panel
In fact, research from the Equity Release Council (ERC) shows that the proportion of homeowners aged 55 and over who are worried about running out of money in retirement has increased to over a third (34%) from 27% last year. At the same time, those who are approaching later life will need to plan to fund a longer retirement with a less generous pension pot than the generations before them.
Couple these challenges with looming debt levels, and the problem becomes even greater for the over-55s. more2life’s latest Later Life Lending research found that debt among this demographic is set to reach £300bn by 2030. In many ways, it is the perfect storm. Growing debt levels, less generous pension fund provision further hampered by poor performance and the economic impact of the coronavirus crisis will ultimately make it harder for many people to adequately prepare for later life – at a time when it is more important to do so than ever.
Fortunately, there are a number of ways that advisers can help to improve the financial health of those approaching retirement. To begin with, advisers need to stress the importance of taking a holistic approach to financial planning for later life. This should include advice on how customers can manage their existing debts more effectively, so they can minimise their unsecured borrowing in the lead up to retirement.
Advisers also need to encourage clients to think beyond the State Pension when planning for retirement, and instead consider how their savings, investments and assets like property can be used to help them live comfortably after they stop working. The truth is that many people don’t realise that the new State Pension pays retirees a maximum of £175.20 per week – which is equivalent to less than £10,000 per year – a sum that is unlikely to provide much scope for extravagance.
Utilising property wealth to fund retirement
As a nation of homeowners, it is perhaps unsurprising that many people are already aware their property can help to fund their retirement, of course. Research from the Office for National Statistics (ONS) shows that close to half (43%) of those surveyed between 2018 and 2020 felt that property wealth would be the most significant contributor to their later life finances. By contrast, less than a third (27%) thought their private pension would fund the bulk of their retirement.
People who are concerned about funding this part of their lives will feel reassured knowing that options are available to them once they reach retirement age – especially in the era of COVID-19 – and specialist financial advice is critical in helping clients understand how later life lending products can improve their financial prospects when they reach retirement.
As a result, an adviser’s role in helping those who are approaching retirement age is now more important than ever. The coronavirus crisis has had a major impact on many whose retirement plans have had to change dramatically as a result of the economic consequences of the pandemic. Having the right conversations with clients early on could make a substantial difference to their long-term financial security, and also significantly boost the income they can expect to receive in later life.