Of the 400,000 that are due to retire in 2015 the average they have saved is £26,000. Technology may offer the only hope to future retirees who cannot afford an adviser.
We are only a few months away from April 2015, which heralds the much debated pension changes and we know that according to the Office of National Statistics, at least 400,000 individuals per annum within the UK will reach retirement age. We are also told that the UK has 18 million people with a pension plan of some description and if we take into account all the individuals who have postponed retirement pending the April changes. All this leads to a very exciting and challenging time for us in the industry and a very important but potentially confusing time for consumers.
We are juggling many timescales, decisions, processes and challenges but as an industry we must keep at the forefront of our minds that retirees have a, if not the most important decision in their lives (so far).
Against all this excitement, however is a stark reality in that the average pension pot is going to vest at roughly £26,000. Later (Earlier) in this edition, you will have read Blackrock's excellent article, which identifies consumers required income, their perception of the size of fund required to meet the income requirement and the size of fund they actually need to meet the income goal. In Financial Services we have a responsibility to build long term strategies to help consumers prepare for their retirement more robustly, while meanwhile helping retiring consumers through the retirement conundrum.
For the 90% of retirees who have a fund of £50,000 or less, it is possible they may choose the guidance route. They are promised a free 20 minute telephone call and a face to face discussion with the Citizen Advice Bureau, but we believe they will still be left to decide their next steps and to find a delivery mechanism to fulfil. We are building solutions to help you in this arena.
What is clear, however, is that regardless of the size of the retirees fund, their challenges and issues are the same:
- Will my decision affect my tax situation?
- Do I want a guaranteed income?
- If I do invest the money, can I afford to lose it or part of it?
- What is inflation going to do over the next n years?
- What happens if I live too long?
- What happens if I die too soon?
They will also have to consider the following changes coming into play in April 2015:
- If the policyholder dies before 75, the death benefits paid by the scheme or plan will be free of all taxes
- If death occurs after 75, the beneficiary will be subject to marginal rates of income tax or 45% if the entire fund is paid out
- While public sector retirees will be unable to switch from defined benefit to defined contribution, other DB members can if they so wish.
- Access to the pension will be available from age 55
- Scheme retirement age of 55 will be increased to 57 from 2028. Going forward it will always be 10 years below state retirement age
- Drawdown restrictions will be removed
- From April 2016, the new state pension is likely to be £148.40 per week.
We have utilised our skill and expertise to look at this very exciting and demanding area and would welcome a discussion. Great tools, quality guidance, appropriate education and fantastic advice will go a long way to help retirees meet their own retirement income goals, but meanwhile, Product Providers / DFMs / IFAs / Aggregators / Research or quote and apply portals we all have some immediate challenges coming up in March 2015 and our industry is fantastic at managing change!
We at Synaptic Software have built tools that can be white labelled for you to build a service for your customers. Please call us on 0800 783 4477