Bluefin’s Robin Hames 
explains the demographic 
and legislative changes set to transform how you advise your clients.

Whatever your political persuasion, it must be said that in the field of legislation impacting on retirement decisions, the coalition government has already demonstrated both its radicalism and urgency.

Choice is always a double-edged sword; the combination of increased complexity and the prevailing economic conditions add up to challenging times for those approaching retirement.

More so than ever, clients need high quality advice and a long-term relationship with their advisers.

The face of retirement is changing. The baby boomers are rapidly approaching retirement. In the UK we are told 13 million people will reach the age of 65 within the next 20 years alone.

Of these, many will have a diverse range of pension plans and arrangements built up over a period of years with different employments during a career that typically would include at least five separate jobs.

Longevity continues to increase and, accordingly, the need to fully explore the range of options available to those at or approaching retirement takes on greater and greater importance.

The requirement for income flexibility and adaptability is far greater now as circumstances cannot be absolutely predicted over the 25 to 30 year life span that now constitutes retirement.

During this time a retiree may have to adapt their cash and income requirements to cater for:

• Changing levels of income to suit changing lifestyle as they get older

• Changes in physical health

• Changes in mental health e.g. losing the capacity to make decisions

• Changes in the desire to pass a legacy onto dependants on death

• Unforeseen contingencies

Drivers of the future landscape

Before focusing more closely on the options available to people looking to retire, work part-time or even take benefits whilst continuing to work, it is important to understand the choices and forces in play in the retirement space which typically include:

• Economic dynamics – i.e. the impact of the global financial crisis, low interest rates, the effects of inflation (especially pensioner inflation which is historically higher than RPI) and falling annuity rates

• Regulation, current and pending, including:
(i) Finance Act 2011
(ii) European Court of Justice ruling on gender
(iii) Solvency II

• Consumer forces

• The cost of a healthy retiree

Economic dynamics

The current dynamics of the market are such that we seem to be in a situation where inflation is rising but interest rates are historically low.