Over a third of Baby Boomers have not yet calculated how much retirement income they can take

29 Mar 2022

Research by technology solutions provider Dunstan Thomas finds there is a burgeoning demand for financial advice among unretired Baby Boomers.

Over a third of them have not yet calculated how much retirement income they will be able to take from accessing all their pension and investment savings at retirement. That represents 49% of all the people between 58 and 75 years old in the UK.

Only one out of every six unretired Baby Boomers knows exactly what they will be able to take in terms of regular income in retirement. Nearly half of working Baby Boomers claim to know roughly what they can afford to take in regular monthly retirement income amounts.

The Dunstan Thomas study also found out that 28% of those taking retirement income from defined contribution (DC plans), and not currently accessing financial advice, are taking more than 3.5% of the total value of their DC pots each year. The average drawdown rate among unadvised Baby Boomers with DC plans is 3.6%.

Demand for financial advice among boomers

“These findings reveal a burgeoning demand for regulated financial advice among Boomers approaching and in-retirement – particularly among younger Boomers more exposed to DC pensions dependence for retirement income,” said Dunstan Thomas director of retirement strategy Adrian Boulding. “There’s evidence here of Boomers’ concerns associated with assuring an adequate and sustainable retirement income, as well as de-risking of portfolios prior to retirement. “There is also clear demand for IHT (inheritance tax) planning as well as advice associated with boosting available retirement income through equity release or downsizing.”

Nearly one in six Baby Boomer intends to seek financial advice associated with “IHT planning for the benefit of your children and grandchildren”. A further 11% were still considering whether they needed advice in this area.

The two hotspot regions for seeking IHT-related financial advice are in London and the Southwest. Ethnic groups most likely to seek IHT advice include Asians (26%) and Black communities (23%). In addition, 21% of Baby Boomers, are not considering de-risking their portfolios until 12 months prior to full retirement.

Only one in 10 appear to have this covered by their pension provider confirming “my provider arranges this automatically, assuming I’m buying an annuity”. A further 7% confirmed that de-risking started five years before retirement and 4% confirmed de-risking glide paths had begun 10 or more years before planned retirement date.

Boulding added: “The confused behaviour around de-risking and reliance on automatic life styling by providers is placing many Baby Boomers at risk of dangerously poor outcomes. “It underlines the importance of an adviser that can tailor an investment approach to suit individual client situations. “Advisers who are focused on supporting Boomers to prepare for their retirements, helping them to optimise their retirement income and leave decent legacies to their children and grandchildren and perhaps save for long term care requirements, are likely to be kept very busy in the next 10 years or so as the largest, and arguably wealthiest generation of all time in the Western world, head into full retirement.”

In addition, research found that a quarter of Baby Boomers plan to or have already used regulated financial advice to gain more knowledge about pensions before they fully retire. A further 15% plan to or have already used guidance services. That includes things such as Citizens Advice Bureau, MoneyHelper and Pension Wise services.

Research also discovered that 37% of Baby Boomers have used a financial adviser at some point in their lives. Yet, many of these historical advice experiences will have been supported by tied agents in the pre-RDR era.