November 12, 2023
A recent report from Standard Life explores attitudes to retirement in the UK, and looks at how attitudes towards finances may have changed over the last few years.
Standard Life has been conducting this research every year for the last three years, and tracking how the changing economic picture has been affecting people’s retirement aspirations. The latest report is based on a survey of over 6,000 people from all walks of life.
At Talis IFA, we’ve been looking at this report through the lens of taking a long-term view of financial planning. Here we share some of the top findings, along with some recommendations of what to discuss with your IFA.
One of the key findings is that people who get involved in financial planning are three times more likely to feel positive about their finances than non-planners.
The research found that 66% of people who take financial advice feel that it’s made them financially better off.
While this is indicative of the value of advice from IFAs (independent financial advisers), we also think it’s important to recognise that those seeking independent financial advice are likely to be people in higher income brackets, with surplus income to manage, and who are therefore less immediately impacted by changes in the cost of living.
Standard Life’s research indicates that, on average, people start to take a keener interest in retirement planning from age 36. However, more than half of the retired people surveyed say that they wish they’d started planning for retirement earlier.
Whatever stage of life you’re at right now, an IFA can help you to develop a financial plan – whether that’s looking towards increasing financial security for a growing family, planning for a comfortable retirement or thinking about how to transfer your wealth to the next generation.
The need for financial certainty is a common thread across all age groups, but what that actually means naturally varies depending on someone’s stage of life.
In terms of retirement planning, it means that people are looking for both security and flexibility in their retirement income. There is also an increasing number of retirees deciding to return to work. Among those surveyed 11% of retired people aged between 55-64 have returned to work, (almost double the 6% who did so in 2022).
The reasons for this are complex, and vary across the age groups. Whilst, overall, 64% of these people have done so for financial reasons, 52% have also said that social factors, like boredom and isolation drove their decision to return to the workplace. It’s also a partial balancing out of the record numbers of over 50s who decided to retire at the height of the Covid-19 pandemic, and who have reversed that decision.
Across the age groups, 51% of men and 55% of women now believe they’ll need to continue to work beyond State Pension age.
If you’re among the people considering returning to work after retirement (or having already taken up employment again), taking advice from a qualified IFA would be a good idea, to ensure that you are making the most tax-efficient use of your money. There may be opportunities for you to continue adding to your pension pot whilst earning again, and you might need to be aware of the tax implications of your additional income if you are continuing to draw from your pension.
Whilst most people want certainty about their income, with 92% saying they need a guaranteed regular income, they are also looking for a certain amount of financial freedom.
89% also said they wanted to be able to access some or all of their pension savings on a flexible basis.
Other important features of their pension savings were a tax-free lump sum (seen as important by 82%), and being able to leave a legacy for loved ones (75%).
Attitudes towards investment risk were split, with 70% preferring the option of low-risk solutions with lower returns, compared with high-risk solutions with the potential for higher returns.
Achieving a combination of financial security and flexibility in retirement is certainly possible, and your options increase the younger you are when you start saving towards it. Balancing the elements can be complicated, though, which is why it’s important to regularly review your retirement plans with your IFA, to make sure that your financial plan is up-to-date, tax efficient and structured in a way that is designed to meet your needs.
Standard Life’s study also highlighted some interesting figures when it comes to confidence in people’s financial situations as opposed to feeling stressed and anxious.
The study included people from all walks of life, and, whilst it identifies different age groups, doesn’t go into a lot of detail when it comes to looking at income brackets.
It seems likely that people who seek and obtain financial advice in terms of investing and saving for retirement are those with higher incomes, or inherited wealth, to begin with, so the percentage of people (61%) who reported feeling positive about their financial situation as a result of making an informed financial plan isn’t, perhaps surprising.
What we found interesting was the increased level of confidence in making financial decisions. 76% of people who had engaged in financial planning felt confident in making financial decisions, as opposed to just 42% of people who had done no planning.
What this tells us is that engaging with a professional financial adviser is a key aspect of achieving financial security and confidence. What’s more, the kind of holistic advice provided by IFAs gives people the greatest sense of confidence in their decisions with 77% of people agreeing that holistic financial advice helped them to make better financial decisions and 76% agreeing that holistic advice helped them plan effectively for their future.
We’d like to help you feel more certain about your financial future. If you’d like the help of a professional IFA to get a clearer picture of your financial situation and develop a plan for your retirement, find a Talis IFA here.
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