Saving for the retirement is a little passee - multiple/portfolio careers and working until we drop - let's take a look at the new paradigm

Retail Financial Services

Retail Financial Services

Just Retirement          owen-james-780-x-520.png

Moderator: Evie Owen, Owen James Group

Expert: Dominic Sherr, Just Retirement

  • One of the introductory statements was that people are living longer but working in a different way e.g. taking gaps.
  • However this was immediately countered with the comment: “Great idea if they can.” The average pension pot is £50K which is up on past talk of £30K pots …however it still does not tally with the portrayal of wealth held by the Baby Boomers. The reality on that front is that this “alleged” wealth sits in their houses. People are actually taking debt into their retirement.

So how are people working? What is the personal reality?

At what age are people taking pension savings? DB schemes ending at 45. DB schemes ending at accural.  DB being transferred to DC.

Auto enrolment – the Treasury is not actually giving much away which sends a conflicting message.

  • There was quite a lengthy discussion around transfer values. Advisers are keen to avoid giving advice they are not qualified to give and those that are qualified are battling with insistent clients.
  • In effect it is a gamble on the annuity rates of the future and how long you are going to live. Gilt yields are at a record low which is another factor to take in.
  • Several schemes transfer some to pot for inheritance. People do need advice. DB requires you to stop work at a certain date. They might want to dip in or out of the fund.

Where to invest is the next question?

  • Equity release – borrowing reasonable amounts of money to give to kids. Our session leader cited a £2m equity release deal at an interest of 4%. If house prices are going up by 20% the deal makes good sense.
  • It offers the ability to pass the wealth on.
  • It was noted at this juncture that there is a definite shift in sentiment in that parents are NOT always willing to pass their wealth on to the kids. They will give them a good education but then enjoy their own later life. However there are others who enjoy watching them spend it. They view their house as an asset from which they can decumulate.
  • Another changing trend: people used to stay put but others move a lot. The house is no longer such a big deal so to downsize financially is just a different route from physically downsizing.
  • Might ER be a solution to provide food rather than a luxury? After all, pension money is the last money you have to spend.
  • Lending advice and financial advice are a bit detached. Very few financial advisers can give equity release advice plus drawdown etc. Maybe there should be one qualification to advise on both?

Older people in the workforce:

  • Sainsbury’s actively employs older people – 70+.
  • Barclays have an intern programme for those in their early 60s. They have a graduate entry scheme for those aged 55+. It is more a personality issue than an age issue. How do you manage these older workers? What do you do if they cease to deliver? The approach requires a fresh mindset.
  • The Government is looking at initiatives around phasing into retirement. Going part time. After a full guns blazing career people might consider toning down over ten years. Retrain.
  • People are rejected because they are thought to be too experienced. One of the group cited the example of someone on a six figure salary who downsized to working at a building society counter. The board were suspicious – why did he want to do it? He was actually really good at it.
  • Maybe people should be encouraged to stay in the same company and do something different?
  • When you start to decumulate maybe that is the time to work part time? This is all great if you have earned enough.
  • The wealthiest live longest; those who have to work are not always healthy.
  • People start their own businesses when they can’t get another job.
  • There have been questions raised over age discrimination on risk-based products. Mortgages are now available to those over 60. Lack of risk taking – limits ability to grow wealth.
  • Looking at the approach of the younger members of society: they go to University; won’t buy a house; won’t pay off loan – they have no aspiration to accumulate wealth. They feel they are already written off. Bit depressing!
  • Their feeling is that they do what they want to now and kick the decisions around later life down the road. Millennials save something like £300 a month – quickly get to the point that it isn’t worth it.
  • Maybe it is a question that no one explains what investing is all about?

Is there a case for simplified retirement advice?

  • For those who have between £20K and £30K. Their need will be less sophisticated but the opportunity cost is crucial. Looking at compound interest of 2% over 25 years.
  • The public have had their fingers burned viz endowment mortgages, Iceland, Equitable.
  • With all the payments out for PPI there has been a huge influx of cash. It is money people didn’t realise they had.

Talk about the advice gap:

  • We are not offering advice to the ones who need it most. In the old days “Mr £100K paid for Mr £12K”.
  • “Which is worse – slightly biased advice or no advice.