UK’s national retirement forecast should spur advisers to action

Not only does the NRF reaffirm our view that UK savers risk falling seriously short in retirement, but it also highlights how underprivileged groups are already struggling most to make ends meet.

Advisers must go the extra mile to reach marginalised groups whose members risk falling into a retirement savings crisis. Disabled people and some ethnic minority groups are disproportionately likely to suffer from a lack of income in retirement. This, in turn, will affect the lifestyle they can afford to enjoy.

Against this backdrop, there is an urgent need for the financial services sector to engage with these groups on terms that will work best for them. With only around six per cent of the UK accessing regulated financial advice, IFAs play a key role in broadening outreach. There are three initial steps that advisers can consider taking to improve retirement outcomes for those who need it most.

Build trust and understanding among diverse groups in society

Advisers, like the rest of the industry, should work with stakeholders and advocates across a range of communities to ensure they receive information and support in ways that build trust. Communication should reflect a diversity of needs and circumstances, recognising the varied concerns that different groups may have.

Ethnic minority groups, such as the Black community, for instance, are struggling disproportionately in the current economic climate. One in four Black people have reduced their long-term saving due to the rising cost of living, compared to only one in nine White British people. If these behaviours become entrenched, more members of the Black community will face poverty in retirement, widening existing economic inequalities.

Understanding nuances such are to key building the trust with different communities that in turn leads to higher levels of engagement with the financial services sector. Advisers should remember the critical lesson from the NRF, that the average pension saver is not representative of the UK’s rich cosmopolitan community.

Consider alternative aspects of retirement planning that people may need

Acknowledging the various contingencies that affect different groups is only the first step towards more inclusive financial advice. Advisers must then craft a more holistic approach to financial planning that can be tailored to a diversity of potential customers.

Most advisers would probably recognise, for instance, that disabled people will have to prepare for retirement with one eye on their higher living costs. However, few may realise that these additional costs amount to a staggering £975 a month on average versus the average non-disabled person.

Moreover, the NRF highlights just how severely disabled people are being left behind. On average, they are on track to have less than two thirds the retirement income of their non-disabled counterparts, meaning that fewer than forty per cent of them are on track for at least a minimum retirement lifestyle (compared to around seventy per cent of non-disabled people). It is therefore clear that they are more likely to rely on additional sources of retirement income such as pension credits and housing benefit.

Many disabled people are all too aware of these financial challenges, but the persistence of this problem suggests that relatively few have been able to access support. If advisers can start to attune to the specific issues faced by disabled people, it will go a long way to improving the financial support and tailored guidance available.

Improve the accessibility of advice by investing in mobile apps

Availability and accessibility of advice is a key issue for advisers to consider. In particular, they must find ways of making their services reach those who would benefit most from getting more engaged with financial planning.

One way to do this is with smartphone apps. Financial services need to go where people already are, which increasingly for many people is on their phones. Apps can drive engagement through sheer ease of use, providing instant secure access to an individual’s financial information after a quick registration process and a simple tap of the app.

Apps are not the answer for everyone, but they would enable the industry to make inroads into a notoriously not engaged group: young people. People currently in their 20s are more likely to miss out on a minimum-or-above lifestyle than any other age group, with 35 per cent of them set to do so. Improved outcomes are dependent on younger people stepping up their saving habits as they grow older, but there is no guarantee that the future economic climate will make this an easy proposition.

If young people are to be empowered to improve their retirement outcomes, apps are an ideal way to do so. That said, more important than any in-app features is the principle of accessibility that must underpin them, enabling as many people as possible to get engaged and get on track for the retirement they want.

Weathering a gloomy forecast

Our new NRF has gone beyond previous indices to highlight the savings struggles among marginalised groups. Now advisers must follow suit, reaching out to these communities to work together on solutions that will stop so many people falling into financial hardship. If the industry can act quickly, next year’s NRF may well allow us to glimpse a brighter future for UK savings.

Source: PA