A quarter of Baby Boomers will consult a regulated financial adviser before retiring

23 Mar 2022

Main drivers for seeking advice close to retirement are to help optimise retirement income levels and for Inheritance Tax Planning

25% of 58-75 year olds seeking out IFAs linked to their pension provision

A quarter (25 per cent) 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 per cent plan to use, or have already used, guidance services from the likes of Citizens Advice Bureau, MoneyHelper and Pension Wise services. Six per cent will use digital services including ‘live chat and other PC-based communications techniques such as online planning tools and platforms’. Just under 15 per cent derive their pensions knowledge from reading the personal finance pages of the national newspapers.

Answers to a separate question discovered that 37 per cent of Boomers have used a financial adviser at some point in their lives, indicating that a much larger group of Boomers have already been convinced about the value of regulated advice in order to get a professional third party opinion on financial planning matters. However, many of these historical advice experiences will have been supported by tied agents in the era of provider-employed Direct Sales Forces pre-RDR before the advice gap emerged.

Advice hot spots include younger Boomers who are still working full-time and have DC plans

Nearly half (46 per cent) for those with Defined Contribution (DC) pensions including SIPP holders, have sought or will seek financial advice about their pension before they retire. And the youngest segment of Boomers captured in this study, aged 58-61, are the most likely to seek pensions-linked financial advice – nearly a third (32 per cent) of them have done so or will seek regulated financial advice.

Over-drawdown threat real amongst DC policy holders

Over a third (35 per cent) of Boomers who have not yet retired (that’s 49 per cent of all UK 58-75 year olds) have not yet calculated how much retirement income they will be able to take from accessing all their pension and investment savings at retirement. 40 per cent of Boomer age working women reported that they had not yet worked out how much retirement income they will be able to take from their pensions, as against 31 per cent of male Boomers.

Only one out of every six (17 per cent) unretired Boomers know exactly what they will be able to take in terms of regular income in retirement; although nearly half (48 per cent) of working Boomers claimed to know roughly what they can afford to take in regular monthly retirement income amounts.

Working Boomers who will depend on DC pensions in retirement are right to be concerned about sustainable drawdown levels. The Dunstan Thomas Baby Boomers’ Retirement Income study also found out that 28 per cent of those taking retirement income from DC plans, and not currently accessing financial advice, are taking more than 3.5 per cent of the total value of their DC pots each year.

Most experts believe that if you want an income drawdown plan to last through retirement you should not take more than 3.5 per cent each year. The average drawdown rate amongst Boomers with DC plans (and no advice) was 3.6 per cent and over six per cent of Boomers are taking out more than six per cent of the total value of their policies each year.

One in five Boomers leave de-risking of portfolios too late

One in five (21 per cent) Boomers, are not considering de-risking their portfolios until 12 months prior to full retirement. Only one in ten appear to have this covered by their pension provider confirming ‘my provider arranges this automatically, assuming I’m buying an annuity’. Seven per cent confirmed that de-risking started five years before retirement and four per cent confirmed de-risking glide paths had begun 10 or more years before planned retirement date.

Adrian Boulding, Director of Retirement Strategy at Dunstan Thomas commented:

“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.”

IHT planning major driver for advice demand

Nearly one in six Boomers (16 per cent) intend to seek financial advice associated with ‘Inheritance Tax Planning for the benefit of your children and grandchildren’. A further 11 per cent 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 South West, where 20 per cent and 17 per cent of Boomers respectively, are intending to seek or had already accessed IHT-linked financial advice. Ethnic groups most likely to seek IHT advice include Asians (26 per cent) and Black communities (23 per cent).

Options for boosting retirement income being explored by greater numbers

The Dunstan Thomas study also explored key options being considered for boosting retirement income levels. The study uncovered that 23 per cent of Boomers has already downsized or are planning to do so to reduce their costs in retirement. The chief reason for downsizing was found to be ‘to find somewhere less costly to run’ by nearly half (47 per cent) of those planning or already completed downsizing moves.

Seven per cent downsized to reduce mortgage debt and the same percentage wanted to release funds to pay for more travelling and holidays. Six per cent of Boomers have already completed equity release exercise and a further eight per cent thought it was likely they would do so in the future.

Dunstan Thomas was able to explore ethnic, sexual orientation and UK national variables in this study. Interestingly, the 58-75 year old LGBTQ+ group proved to be downsizing and equity release enthusiasts: 12 per cent of this group have already released equity from their home and the same percentage have already downsized. Of those likely to downsize or complete equity release arrangements, more than half (51 per cent) of Boomers want to complete one or other of these actions within the first five years of full retirement.

Adrian Boulding, Director of Retirement Strategy at Dunstan Thomas, explained:

“These findings reveal a burgeoning demand for regulated financial advice amongst Boomers approaching and in-retirement – particularly amongst younger Boomers more exposed to DC pensions dependence for retirement income.

“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 planning as well as advice associated with boosting available retirement income through equity release or downsizing.”

Adrian Boulding of Dunstan Thomas, added:

“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.”

by Adrian Boulding, Director of Retirement Strategy at Dunstan Thomas.

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