Understand how retirement can affect your clients.
The concept of “retirement” means different things to different people. Some see it as looking forward to a prosperous golden age where the nine to five is a distant memory, while others might wonder if they will ever be able to give up work.
The fact is that in the last decades, things have changed for potential retirees in ways that might have previously been unthinkable, and for professionals offering help with money issues regarding pensions, it means that their job has become far more complex.
One of the biggest challenges in the whole area of pensions is the undeniable fact of an ever-increasing older demographic. The benefits of lifestyle changes and medical advances mean that overall, people in the UK are living longer than ever before.
Although some suffer from ill health as they grow older, the vast majority have expectations of maintaining a good quality of life well beyond what was previously thought possible.
In 1925, the UK introduced a pension based on contributions paid at work by employer and employee, which was paid out from the age of 65 without a means test. In 1940, the qualifying pension age for women was reduced to 60 years.
Recent and continuing increases in the age threshold for qualifying for the state pension are a recognition of the financial burden of an “age pyramid” inverted to reflect more older people than younger members of society. It is also important to remember that when this particular “universal benefit” was introduced, life expectancy in this country was far lower than it is today.
One of the knock-on effects of this situation is that more people than ever before are looking into ways to get some simple financial advice about providing for themselves in their retirement.
This aspect of individual responsibility has been encouraged by recent government actions, from the reforms regarding accessing pension funds through to the introduction of the workplace pension scheme, which now obliges all employers to automatically enrol workers into a pension scheme and make contributions on their behalf.
For many professionals offering financial investment advice, the area of pensions is now a major concern.
In the past, public sector workers may well have simply relied on “final earning” workplace schemes, and many lower-paid workers and self-employed people might have chosen to turn a blind eye to the whole situation.
However, people from across the social and financial spectrum are looking at ways to ensure that they can maintain a solid standard of living in their later years, whether that means retiring or keeping on working in one form or another.
Artificial finish line
Mitch Anthony, in his book The New Retirementality, declared that retirement is an artificial finish line that was originally set up by companies that wanted a turnover of workforce in age-related terms.
Today, your potential clients may not even want to stop working, especially if they are self-employed or work in a freelance capacity of some kind.
Essentially, the whole area of pension investments and retirement planning revolves around people wanting to make choices about how they will live the rest of their lives.
Julie Lord, in her article “The big retirement lie must end” published by Financial Planning Today magazine, said: “Our experience is that people who can’t wait to retire, aren’t doing something they enjoy. They have been persuaded that retirement will be like a long holiday where they don’t have to get out of bed in the morning.”
When people lose their lifelong routine, retirement can cause problems for many. Many medical studies are revealing a correlation between a lack of activity and the onset of dementia-related illness, and others point at the negative effects of a loss of social interaction that retirees can experience.
People who have led active working lives can often become bored and disillusioned in retirement and go on to suffer health problems as a result.
This doesn’t mean that the best financial advisers should take on the role of health advisers or life coaches, but it does mean that they have a responsibility to deal with each client on an individual case-by-case basis.
Counselling clients carefully before they give up work can mean something as simple as enquiring about their plans and then working out how they can fund them. Some people will have a new career or a hobby that they want to explore, while others may wish to have the financial capabilities to travel. Whatever their needs, it is your job as an adviser to look for practical and realistic solutions.
Changing work patterns
For people in creative industries, such as writers, artists, actors and musicians, the idea of retiring at all is something of an anathema. People who love what they do and feel that they still have a valuable contribution to make may want to continue doing it as long as possible.
There are many other professionals that this can apply to, such as those involved in alternative health therapies, educational professionals and even specialist advisers who want to go on giving others the benefit of their own experience and insight.
These changing modes are part of a societal change that means that there are those who will never want to retire. In these cases, it is your job to find a way of helping them plan to be able to continue to do what they do, irrespective of their age.