The pension freedoms are still relatively recent, which means advisers’ clients will have plenty of questions about what this means for their later life planning.
Being prepared to answer some of the most commonly asked questions should help advisers clarify to clients the choices they face when it comes to funding their retirement and reassure them about their financial future, often when it matters most.
Given that no-one knows how long they are going to live into retirement, it is not surprising that some of the questions advisers face are around how long the pension pot will last.
Neil Adams, pensions and investments expert at Drewberry, says: “The foremost question clients ask now drawdown is more widely available is ‘When will my money run out?’
“Unfortunately, not even the best advisers have a crystal ball but it’s possible to provide a rough model of when the money may run out judging by the size of your pot, potential investment returns and how much income you want to draw.”
While it may seem an impossible question to answer initially, there are plenty of tools available which should mean the adviser can help their client come up with a realistic estimate.
Alistair Cunningham, chartered financial planner at Wingate Financial Planning, suggests: “They’re getting an holistic review, which is cashflow planning led.
“It becomes, ‘I want £35,000 this year, where do I get it from?’ And the pension may only be part of that for some people.
“To be fair, not all of our clients have other pots than pensions and some of them are taking smaller incomes from their pension and, in some cases, this is probably a minority, [some] are taking a very high level of income from their pension.”
He says the question he often fields is framed as: “Here’s what I want to do, how do I do it?”
This may be a more common query among clients who are familiar with their financial circumstances, and have a definite idea of their goals for retirement.
For many advisers, their clients will have more simplistic questions to put to them.
Scott Gallacher, chartered financial planner at Rowley Turton, says he is frequently asked by his clients about what they should do, which he notes is largely dependent on individual circumstances.
But some people have questions about specific products, such as annuities.
“Are annuities poor value? As an investment, they probably are but as a guaranteed income for life, i.e. an insurance against living too long, they still have an important place in financial planning,” replies Mr Gallacher.
Another question he is typically faced with is “What level of income can I take?”.
Mr Gallacher answers: “With annuities this will be a figure depending on the pot and the options included, but with drawdown this will depend on the asset mix, attitude to risk and life expectancy.”
