Tuesday, 26 June 2018 10:35

Nicola Watts: Just flogging pensions is not enough

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Chartered Financial Planner Nicola Watts APFS Chartered Financial Planner Nicola Watts APFS

I read with interest the article online at Financial Planning Today which stated that the results of a recent Aegon study showed that 38% of respondents were not confident about their ability to retire comfortably and were unprepared in terms of pensions and saving to fund their retirement.

This figure in itself is worrying, but possibly more worrying were the figures regarding how few people knew how much they’d need and how much they currently had saved. If you don’t know what you’re going to need and you don’t know how much you’ve got, how do you know what action you’ve got to take to address the issue?

It’s clear to see that simply “flogging” pensions or investments and all employees being auto-enrolled to workplace pensions isn’t actually answering the most basic of questions that need answering.

Financial education is key, but it doesn’t need to be complicated. We, as an industry, can have a tendency to over-complicate things, and if “Joe Public” doesn’t understand, they’ll switch off and lose interest. Maybe taking things back to basics is what’s needed – how much do I need? How much have I got? How much do I need to save to fill the gap? Then, and only then, do you need to overlay the more complex elements of products and taxation to more efficiently reach these goals.

 

And that’s the first step in any financial planning journey – goals. People need to be more engaged in understanding their future needs, but also have open and frank discussions about how their needs might change through retirement and the impact this might have on retirement planning. We need to get clients thinking about what retirement might look like, how much that might cost and target savings accordingly, rather than simply saving an affordable amount, which for many won’t be enough.

For those who have already accrued the income they are going to need, it’s about “giving them permission” to do the things they might not think are affordable. Being able to clearly demonstrate to these clients that they have already achieved financial independence, means that they can do more than they might otherwise - holidays, cars, gifts to children, etc.

Equally, I find it frustrating when clients come to us at their planned retirement age worrying about whether they have enough, only to show to them that they could have done it earlier! When first raising this with clients, I often call it a “roller coaster” – spend lots in early retirement whilst young, fit and healthy, then inevitably life slows down and they’ll tend to spend less, and late retirement might bring the possibility of very expensive long term care and huge income needs.

Basically, it’s about explaining that they’re unlikely to need to sustain initially high levels of income; life will undoubtedly slow down and they’re likely to need lower levels of income, at least for some part of their retirement.


Nicola Watts APFS Chartered Financial Planner, Chartered Wealth Manager, CFPTM Chartered FSCI - director of Jane Smith Financial Planning

After joining the family business in 2000, Nicola qualified to provide advice in 2001, and has been a director of the business since 2006. Since the retirement of her mother (Jane Smith), Nicola bears sole responsibility for the management of the firm, and the advice provided to clients. Nicola is married to David and has two young children, Emily and Olivia, and Poppy the black labrador.

 

 

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Read 1264 times Last modified on Tuesday, 26 June 2018 10:45
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