This was echoed by Craig Muir, senior intermediary development and technical manager at Royal London, who says: “The power of these Retirement Living Standards lies in giving people a real sense of what they’ll be doing and how they could be spending their money when they retire.
"They explain to clients about the building blocks of their lives – their car, their home comforts, how much they can give their family, the kind of holidays they’ll have – and it helps them visualise what they want in their retirement. This should help with getting them to engage with their pension.”
Although lots of free guidance exists to help people understand pensions, Raghwani warns it is important to interpret the results correctly.
He says: “A lot of free tools exist online with providers such as Hargreaves Lansdown, AJ Bell and many others, that allow clients to input their contributions, time horizon and potential growth rate to help them work out their pension pot and what that could provide as an income.
"The issue with clients doing this themselves is that they could have a false sense of security as they may input unrealistic growth rates, which may not align with their risk preference.
"These tools simply project returns on a straight line and a lot do not factor in inflation. This is not a true reflection of how investments work.
“The best tool in my view is undertaking a cash flow modelling exercise. This can be personalised, and the adviser is on hand to provide guidance and advice.”
Aamina Zafar is a freelance journalist
