People around the world don’t have enough savings to last them throughout retirement, the World Economic Forum (WEF) has found.
In its Investing in our Future report, the international organisation is urging countries, worldwide, to make provisions to cater for the population’s the rising life expectancy and the financial needs that come with it.
On average, men’s life expectancy is 82-83 years compared to 85+ for women.
But, according to the report, their savings are only going to last them until their early 70s, leaving a decade of financial insecurity in their futures.
Source: World Economic Forum
Financial advisers to the rescue
Verona Kenny, head of intermediaries at investment management firm 7IM, told International Adviser that financial planning and advice can be crucial to making sure clients have enough income to support them throughout their later life.
“Running out of savings at retirement is one of the biggest challenges facing retirees and it’s clear that this issue isn’t just isolated to the UK.
“Financial advisers can, of course, play a huge part in helping clients ensure that their retirement savings last a lifetime by creating robust cashflow models and building suitable retirement portfolios. However, this in itself presents significant and time consuming challenges for advisers.
“This is perhaps why we have started to see those advising on drawdown building centralised retirement propositions and outsourcing to dedicated retirement income services as part of this proposition. These services can help advisers tackle the challenge of delivering a steady stream of income for clients while, at the same time, ensuring that their retirement pots last a lifetime.
“However, not all retirement income services are created equal. The best solutions in the market are those that are not only cost effective and scalable but also have the ability to adapt to clients’ evolving needs as well as manage sequencing risk and the risk of ruin.”
Can financial literacy be enough?
According to the WEF, knowledge of the financial landscape can be helpful when it comes to the decumulation process; but the great range of products and services available can be overwhelming and make people “switch off”.
“Policymakers and plan providers must recognise that, over a working life, the average saver will work for multiple employers and potentially end up with numerous retirement accounts,” the report said.
“Dashboard reporting, which pools together information regarding different accounts (for example, those held by previous employers), projected government benefits and other benefits (eg defined benefit pensions) would be a significant tool for a saver.”
In April, the UK government gave pension dashboards the green light, which will require all providers to make information available by law.
Seek professional guidance
“Access to advisers who can help guide and potentially implement decisions will be vital,” the report added.
“A recent study in the UK found that ‘those who take advice are likely to accumulate more financial and pension wealth, supported by increased saving and investing in equity assets, while those in retirement are likely to have more income, particularly at older ages’.”
Some firms have resorted to technology to cater for those that could not afford traditional advice – such as the introduction of robo-advisers – but this might not be a good fit for everyone.
“For many, speaking to a human financial adviser, particularly at inflection points in life (entering education, starting a family, planning for retirement and preparing for death) will continue to have appeal and value,” said the WEF.
“Financial advice is, and will continue to be, a vital component of ensuring good retirement outcomes. While defaults and technological solutions may be suitable for large portions of the population, savers will need access to advice that is conflict-free, convenient to access, comprehensible, delivered by competent advisers and in the advisee’s best interests.
“All of this must be delivered at a cost-effective and transparent price.”
