Prudential’s Adviser Opportunity Survey focused on the opinions and predictions of financial advisers and found that advisers' clients’ fear they have not saved enough for their retirement. With advisers predicting that equity release products such as lifetime mortgages will be an area of growth, it highlights the need for people approaching retirement to utilise a number of different saving and investment vehicles to enable them to have a more comfortable retirement.
Clients’ top concerns
For the majority of advisers (54 per cent), retirement planning is top of their clients’ most pressing financial concerns. In particular many of their clients have no idea where their retirement income is likely to come from.
Inheritance tax (IHT) planning was already on the radar for some clients, but this year with increasing house prices and a relatively low threshold mean IHT planning is now the second most pressing concern with 16 per cent of advisers saying that clients are trying to negate the impact of IHT. Concerns around investments (14 per cent) complete the top three, as customers worry about ongoing volatility, despite a rise in markets. Generic saving and tax concerns, along with planning for children’s education, feature at the bottom of the list.
Business growth opportunities – the rise of equity release
Clients’ top concerns shape what advisers think will drive their business growth over the next five years. Pension products are predicted to be a big growth area with over a third (36 per cent) of advisers expecting this to have the largest impact on their business over the next five years. However, almost a quarter (24 per cent), are tipping equity release products to increase in popularity. This is a rise of 11 per cent on last year.
Equity Release products – one size does not fit all
2006 saw a number of new entrants to the market and this led to increased innovation and enhancements of existing equity release products. This time last year, a low interest rate was the feature most clients based their decision on (29 per cent). However, rate is now much further down the list, replaced by ‘easy to understand’ as the most important factor (20 per cent) for clients.
Flexibility is still important with almost a fifth of advisers citing it as their clients’ top consideration when taking out a lifetime mortgage.
For someone who does not need all the money up-front, a more flexible lifetime mortgage can prove cheaper in the long run, as they are only charged interest on the amount they have borrowed.
Retirement provision – biggest concerns
Although retirement planning is the key concern for clients, more specifically, most advisers (40 per cent) stated that having not saved enough for retirement was their clients’ biggest worry. This coupled with the fact that only 4 per cent of advisers said their clients have no pension, may suggest that the retirement message is finally hitting home.
Ali Crossley, director of lifetime mortgages at Prudential UK, said: “Retirement planning is clearly still a core focus and people are increasingly realising that they may not have saved enough to support them when they retire. It is important to note, however, that it’s never too late to plan for retirement, though the earlier people start the more time they have got to save.
“Speaking to a financial adviser will enable people to see the full range of options available by utilising the number of different saving and investment vehicles that are available in the market. This could really improve people’s overall position and could ultimately enable them to have a more comfortable retirement.”
