Providing a professional service is all about being useful.
Being useful is being in the right place to offer the right solution at the right time.
In your case, there are two important groups of clients that you can put yourself in the right place at the right time.
- Clients at the later part of their working life may not want to accept a sudden retirement. You could add significant value by helping the clients plot how they transition from earning an income to living off their own resources.
- Any business owners are potentially likely to suffer some sort of skills shortage over the coming decade. You could help them manage this risk by retaining people who may otherwise feel ‘obliged’ to retire.
A carefully planning campaign to both groups of people, who are already your clients, could reap significant rewards for your business.
For many, the sparkle of excitement that retirement might have can often be dulled by the fear of not knowing how to make that transition.
Pension freedoms mean that people don’t need to think about or plan to a single, set retirement date.
Interestingly, pension freedom is really reflecting societal change, rather than influencing it. People have a different view of what retirement means. People are questioning how long they want to work for, what they want to do in retirement, whether they mix work and hobbies or interests and holidays.
It isn’t just pension freedoms; The government abolished the default retirement age in 2011, meaning employers could not force employees to retire when they reached 65. The state pension is rising to 66 between this year and 2020 for both men and women, then to 67 between 2026 and 2028 and then to 68 by the late 2030s with further rises linked to life expectancy.
These changes are potentially empowering, but they bring their own risks. A recent report from the What Works Centre For Wellbeing suggests that a lack of control over the retirement decision leads to poor retirement wellbeing.
Wellbeing was higher for those who had control over the timing and the planning of their retirement. It suggests that the sudden shift from employed to retired isn’t working and where possible individuals who are able to wind down into retirement by either part time work, bridging jobs or even volunteer work will be happier in their retirement for it.
This is where phased retirement can be a valuable tool to have in your kitbag.
Given what we all do for a living, it is easy to focus on the numbers. A key advantage to phased retirement, however, is the emotional preparation of going from full time employment to retirement.
A phased retirement strategy offers flexibility. Employees approaching normal retirement age can reduce hours they work or work for their employers in a different capacity after retirement.
They can job share, telecommute or do consulting work.
For business owners, the risk to help mitigate is that of a potential skills shortage. In a 2016 survey the Society for Human Resource Management found that a third of employers are expecting staffing problems to continue in the next few years.
There are other key benefits for employers too, namely continuity, training and consistency are all reported to increase where older employees are retained.
PricewaterhouseCoopers calculated this year that were the UK to match New Zealand in terms of the over-55s in the workforce, it could add £180bn a year to the UK economy. All this is certainly having an impact on behaviour around retirement.
Citizens Advice sees a new pattern of retirement in a report entitled “Life after pension choices”. It noted that, by 2014/15, 1.1 million people aged over 60 were both in work and drawing pension income. This is almost double - up by 0.5 million – from the previous decade. Citizens Advice expects this number to increase further, at least partly due to pension freedom.
Positioning your firm
New organisations are springing up to offer help to those not yet ready to retire. For example, membership platform Next Up offers advice to those considering a portfolio career. That is the sort of person who may very well want the help of a financial planner as well.
What is also of interest is that only 7% of people working past state pension age said they were doing so because they wanted to boost their pension pot. Nonetheless, it is a natural consequence that these individuals will not have to access their pot, or as much of it, as those who give up work entirely.
There are clearly some very detailed decisions to think about relating to; tax, income needs now and, in the future,, what if anything they should be contributing to a pension during the second or third career stage, calculations about the state pension entitlement and potentially delaying taking it, let alone what pot of savings clients should be withdrawing an income from and how to access it.
It is worth considering how your firm is adjusting your marketing and communications to highlight the idea of phased retirement and how it can be done - talking not only about the financial implications but also the life rewards.
This can be done via individuals and corporate clients, I have seen several IFAs talking to senior management about how to integrate phased retirement into their business plan for older employees and offer advice lines from the workplace directly to financial planners. Other firms are setting up information hubs for second and third career choices for retirees and about the benefits, risks of phased retirement and how to make it work.
The lack of a set pattern for retirement may benefit clients in a range of important ways. It is also another excellent opportunity to get the message across about just how beneficial financial planning can be.
As such, it might be worth holding some separate group events for business owner clients and clients entering later stages of working life, to talk about the wider concepts of working balance.
This can then prompt individual discussions at the next individual reviews you have.