Maintaining living standards remains top retirement aspiration but clients show growing desire to pass on wealth

• Two thirds (66%) of advisers said maintaining living standards is the top retirement aspiration
• The most common client concern is exhausting retirement savings early
• Delivering clients’ minimum income requirements amid macro-economic uncertainty and market volatility was among top adviser challenges for 2022
• 29% of advisers said leaving savings to loved ones is an objective for all of their clients (up 5% from the previous year and up 10% from two-years ago)
• 60% of advisers said more clients are looking to update their wills and trusts than before the coronavirus pandemic

Aegon research shows maintaining pre-retirement living standards is the top aspiration amongst clients receiving retirement advice. Two thirds (66%) of advisers said this was an aspiration for their clients, making it top of the list for the second year running.

Advisers noted that delivering on client income aspirations has been challenging in recent years following the onset of the coronavirus pandemic. After a decade of relatively stable markets, we are now in a world of volatile markets, low interest rates and high inflation. A quarter (25%) of advisers listed concerns relating to the financial markets as their top challenge for 2022, with some expressing specific concerns about meeting clients’ minimum income requirements while investing in line with their risk appetite.

Despite the challenges, advisers are well positioned to support their clients through uncertainty. Over a third (35%) said they have adapted their business models and processes for delivering retirement advice during the pandemic, and the research shows a growing sophistication in the use of planning tools to support sustainable income withdrawals.

The research also suggests a growing focus on passing on an inheritance. 29% of advisers said leaving part of their retirement savings to loved ones was an objective for ‘the majority of clients’, an increase of 5% from the previous year and up 10% from 2-years ago. This rises to 90% for ‘at least some of their clients’.

The focus on inheritance is reflected by a comparable rise in the number of clients looking to tidy up their finances through wills and trusts. 60% of advisers ‘agree’ more clients are interested in updating their wills and trusts than prior to the pandemic.

Client concerns

The most common client concern is exhausting retirement savings early. 53% of advisers said their clients were concerned about running out of money before they die, which has risen above worries over health and longevity compared to the previous year.

Steven Cameron, Pensions Director at Aegon comments:

“Maintaining your ‘working age’ lifestyle throughout retirement is the primary objective for many but to truly deliver on this, individuals need substantial savings, a robust financial plan and a clear picture of their future lives. Advisers can help to support this and recommend both adequate contribution rates and the best investment approach for reaching goals. They also play an important and ongoing role in determining how much income their clients can take in retirement while minimising the risk that assets are exhausted earlier than planned.

“Some advisers note that recent market volatility and wider economic uncertainty has meant delivering on clients’ minimum income requirements has been a challenge. The research found there has been growing sophistication in the use of planning tools to support safe withdrawal strategies. Looking ahead, there is further uncertainty about the economic outlook, with prices soaring and interest rates low albeit slowly rising. Advisers will have a key role in assessing how this could impact their clients’ ability to meet income requirements, and potentially adapt their strategy accordingly.

“The research points to a growing focus on passing on an inheritance, with clients increasingly looking to update their wills and trusts. The pension freedoms have increased the options here with over 55s now being able to access their defined contribution pension pot flexibly. For some, the key consideration is to meet their minimum income requirements sustainably, without running out of money before death. For others, it’s about balancing inheritance aspirations with a comfortable retirement income. These are highly complex areas and advisers are ideally placed to support clients with their options.”