3 Simple Ways to Improve Your Customers' Retirement Planning

In this piece, we will help you to understand the things your customers need to consider before taking the leap into retirement and offer some tips on how they can improve their current situation to maximise their income so it lasts a lifetime.

During their working life, your customers will have regularly set aside a portion of their hard-earned salary into a pension pot, whether via a workplace pension scheme or SIPP.  Until now, they won't have been able to access their pension pot and will have become more accustomed to patiently watching it grow.

As your customers reach a point in their life when they would like to begin the transition into retirement and begin withdrawing an income to support their retirement lifestyle, they’ll want to make the most of it. 

In this piece, we will help you to understand the things your customers need to consider before taking the leap into retirement and offer some tips on how they can improve their current situation to maximise their income so it lasts a lifetime.

Review your customers' retirement plans

There’s a lot to consider. Firstly, you’ll need to assess your customer’s current situation and ask them some questions:

What do you want your retirement to look like? - you will need to review their aims, dreams and aspirations for retirement.  How much they have saved in their pension pot; their age, health; financial commitments; and the underlying market conditions at the time they wish to start drawing an income are all factors that will influence their future lifestyle and the ways they will generate an income to maintain it.

How will inflation and withdrawals affect their pension pot? - inflation could reduce the purchasing power of your customer’s money over time, so they need to think about how they manage their money to protect the value of their retirement pot. They will also need to consider how much money to take from their pension pot and how this might affect how long their pension pot lasts. Running out of money is a real possibility without a suitable withdrawal strategy

How will their remaining pension be invested? - choosing drawdown as their preferred method of income will involve keeping some of your pension pot invested. Choosing the right approach will depend on a range of factors. We’ve outlined some potential withdrawal strategies and how they can help you achieve your retirement goals in our recent drawdown diaries series.

Ways to improve your customer’s retirement prospects

Once you have reviewed your customers' retirement plans and answered the questions listed above, you can now look at some simple ways to improve their prospects;

Increase contributions to their pension

Your customer may still have time to boost their pension before retirement by increasing the amount they put in each month. Each contribution also brings an immediate boost in the form of income tax relief. 

The contribution amount we show in the tool is the amount invested, although the cost of the contribution can be much less than this. For example, a higher rate taxpayer can contribute £100 at the cost of just £60 (England, Wales and Northern Ireland) or £59 (Scotland), due to these contributions being taken from gross pay. 

Learn more from this Money Advice Service guide: Tax relief on pension contributions

Delay retirement age

Retiring at a later age allows more time for your customer to contribute to their pension pot and more time for it to potentially grow.

The age their state pension starts is also an essential factor to consider. Retiring before their state pension starts can have a significant impact on the length of time their money will last. This is because they’ll need to use their pension savings to bridge the gap between full-time employment ending and the state pension beginning. 

If they work beyond their state pension age and earn between £8,600 and £45,000, they won’t pay National insurance anymore. That means an extra 12p for every pound.

Rates for guaranteed income products (annuities) also increase as they grow older. So, if they’re considering using their pension pot to buy a guaranteed income, delaying might mean they’ll receive a higher income, as long as overall annuity rates are not falling.

They can learn more from this simple Money Advice Service guide: When can I afford to retire? Sharing these simple guides can be a great way to engage your customers.

Look for other sources of income

Here are some of the examples:

Final salary pension

Your customer may have worked for a company that provided a final salary or defined benefit (DB) pension scheme. These schemes pay a secure income for life, based on the number of years they worked for the company and the salary earned.

Rental income

They can include any money they expect to receive from the rental of a property or room within their home. 

Lifetime mortgage

A lifetime mortgage can provide a regular amount concerning money secured against their home. When they die or move into long-term care, the home is sold, and the money from the sale is used to pay off the loan.

Part-time work

Working part-time in retirement is becoming increasingly popular as a way of both easing into retirement and making it more affordable. For example, instead of retiring completely, they might embark on a decade of partial retirement, gradually reducing their work commitments while taking progressively more from their pension.  

Looking for more help?

Pension Wise, The Pensions Advisory Service and the Money Advice Service all offer support and guidance for people looking to talk about money and pensions.

So what next?

More and more people expect an engaging online experience from their providers. Yet 40% of all but the biggest financial institutions fail to offer this. So, stand out from the crowd and give your customers the experience they expect. 

Our EVDirect suite of digital retirement planning solutions can help consumers better understand their finances with a unique, personalised experience bringing their finances to life.

If you would like to get in touch or speak to a team member, please email us; contact@ev.uk 

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