More than half of people approaching pre-retirement age have not made any plans for the financing of their later life, with those in their forties particularly at risk, research has suggested.
About 54% of people in their forties and 49% of those in their fifties have “not done anything” to plan their retirement, research by Aviva found.
The insurer found about one in five people in their forties – the group most likely to be under financial pressure – felt “mostly or completely out of control of their lives”.
In this age group only 18% said they have spoken to a financial adviser, and 10% have made a full financial plan, Aviva said.
The insurer surveyed 6,000 people aged 30 plus in September last year as part of its Voice of New Retirement study, which measured people’s happiness, finances and future planning.
The insurer said the planning gap it had detected presented an opportunity for advisers, as it found evidence people who plan earlier are more likely to consider themselves financially comfortable and happy in retirement.
Retirement advice became increasingly important following the government’s pension freedom reforms, which allowed all defined contribution savers over the age of 55 to access their savings in any way they wish.
However, figures from the Financial Conduct Authority (FCA) published in January showed almost half of those opting for income drawdown in retirement between last July and September did so without seeking advice.
Value of Advice
Aviva said the impact of financial planning on people’s happiness in later life was clear. Its research found 65% of retirees who started planning well before retiring were happy with their financial situation, compared with 38% of those who didn’t plan until they retired.
It also found about a third of retirees who started planning early felt being retired has exceeded their expectations while one in five of those seeking advice at-retirement said the same.
Conversely, those who didn’t plan for retirement are more likely to find their financial situation in later life worse than they imagined, with 11% saying they had had a negative experience, Aviva said.
Aviva Adviser platform chief executive Tim Orton (pictured) said: “It’s worrying to see that people in their forties, many of whom will be in a good position to be preparing for their retirement, feel completely out of control.
“And I don’t think it’s a coincidence that the same group have done very little planning. Advisers have a really important role to play for these people, and while it can be difficult to get them to commit to actions, it can have huge differences on their happiness and financial stability in later life.”
Aviva’s key findings about different age groups
For people in their 30s, it can be difficult to get them thinking about retirement. They are passively contributing through auto-enrolment, however, 8% of band earnings may not be enough to create a happy retirement.
For those in their 40s, they feel out of control but are likely to be at the most financially rewarding time of their career. Advisers who form relationships with people in their 40s could be creating a great future for their business.
In their 50s, some will be focusing on their retirement; others will feel it’s a million miles away. People considering drawdown may benefit from looking at a risk-seeking investment portfolio, as many schemes pursue a default investment strategy that is risk averse. Advisers can play a key role there.
For those aged over 60, de-risking is important for those with a limited capacity for loss, but people who choose drawdown still have a 25 year or more investment horizon. Advice to help understand the implications of different levels of risk will help them optimise returns from their investment portfolio.
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