IFA Magazine recently reported that the average UK pensioner is set to run out of money seven years too soon.

The report looked at average pension savings compared to the pot needed to live a comfortable retirement. It found that those aged between 65 and 74 currently have a huge pension shortfall, which could see their money run out by age 78. 

According to the Office for National Statistics (ONS), the average UK life expectancy for those aged 65 in 2020 is 85 for males and 87 for females. This leaves a seven-year gap from the time that the average pension pot runs out.

Thankfully, financial advice from Expert Wealth’s team of professionals can help you to overcome this shortfall and bridge the gap, allowing you to live the lifestyle you choose for the rest of your life.

Here’s how we can help you.

1. Prioritising pension saving 

The World Economic Forum (WEF), organisers of the annual Davos conference, are quoted in Financial Planning Today confirming that strained retirement plans and risk-averse investors are resulting in huge pension shortfalls.

The issue is worse for women, who have longer life expectancies, and a particular problem for Japanese women – Japan has the highest life expectancy worldwide.

At Expert Wealth we can help you to prioritise your pension savings.

We can do this by helping you to pay your future self first, calculating your disposable income and putting money aside for your future now, before budgeting with the money that is left. We can also use cashflow modelling to run “what if” scenarios that can help you understand the real-life consequences of the decisions you might make.

2. Aligning your long-term investment to your risk profile

The WEF looked at six major economies – Australia, Canada, Japan, the Netherlands, the United Kingdom, and the US – and found that pension savings would run out between eight and 20 years too early.

It recommended encouraging a long-term mindset of diversified investment and an “appropriate” level of risk. 

It’s no coincidence that this is exactly how we manage your pension at Expert Wealth.

We get to know all of our clients so that we can understand your financial position now, as well as where you would like to be in the future. Frank discussions can then help to put a plan in place to get you where you want to be.

Your risk profile, and your capacity for loss, might change throughout the decades of a long-term investment but your goal is unlikely to change. This means your plan won’t either.

By focusing on your long-term goal, we can diversify your investments across sectors, asset classes, and geographical regions within an allocation that makes sense for you. 

In the earlier years of your pension saving, you can likely afford to be more aggressive, accepting a higher level of risk for the reward of higher returns during the all-important accumulation phase. As retirement approaches, it is right that you will want to consolidate your gains, and this might warrant a move to lower-risk investments. 

Whatever your plans, we’ll be alongside you for every step.

3. Understanding that your expenditure won’t be uniform

Ensuring that your pension fund lasts isn’t just about amassing a large enough pot. What you do with that money when you retire – your pension decumulation – is vital too.

Again, the WEF have recommendations.

The organisation points to the fact that projections are often based on withdrawals of 4% each year, which is unlikely to match real-world spending.

We understand that all of our clients are different. While you might have fairly regular outgoings throughout retirement, it is more likely that your spending will fluctuate, possibly in line with the “retirement smile”. 

Simply put, the retirement smile is a line graph tracking retirement expenditure. It begins with the early active years of retirement when travel or home renovations, for example, mean expenditure is high. Later, your outgoings will likely fall. The smile is completed by growing expenditure in later life when the cost of care might see your outgoings rise.

No two “smiles” will be the same, but a robust plan and careful management of pension withdrawals – especially via flexible options like drawdown – will help to ensure you always have money there when you need it. 

Get in touch

With decades of experience, our Chartered Financial Planners have the expertise to help you plan your retirement your way. If you have any questions, please get in touch and speak to us today.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.