Retirement

‘Cliff Edge’ retirement unpopular with majority of today’s workers

Tips from our experts on enjoying a phased retirement

A recent survey* has found that half of over 50s shunned the traditional ‘cliff edge’ retirement, preferring to ease themselves in with a ‘phased’ approach.  This could mean drawing down some pension income to allow part-time working without compromising on total income.  

The appeal of a transitional approach allows workers to adjust the amount of time they work before giving up work entirely.  For example, if you can afford to retire age 65, then phased retirement might mean you can reduce your working hours from age 62 and stop work altogether at age 68.

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There are many pros of a phased retirement but also some cons to consider.  Our experts have detailed these below to help workers think about how they might like to take their retirement.

PROS:

      • INCOME ADJUSTMENT - most people will have a lower income in retirement than they do through their working life. Phased retirement can provide a middle ground that helps them to adjust gradually to living on a tighter budget and transition from building their savings and pension assets to living off what they have. This requires a sharp change of mindset for those who retire ‘cliff edge’.

      • EARLY RETIREMENT - if you could ordinarily afford to retire age 65 then phased retirement might mean you can reduce your working hours from an earlier age and stop work altogether later on.  Plus, some people actually like their jobs!

      • ACTIVE MIND – besides the financial changes, retirement involves a significant lifestyle shift. Some people can quite happily fill seven days a week with leisure activities.  However, many like to have some structure to their week, enjoy interacting with their colleagues. Working a lighter schedule can extend the number of years an individual can continue to work for.

      • FINANCIAL BENEFITS - if in good health workers are more likely to stay in employment longer which brings financial benefits as well as more time for leisure activities.  This means workers get the best of both worlds, benefitting mentally and socially from work, as well as continuing to receive an income and enjoying more leisure time.

      • GROW INCOME - continue to grow your retirement income, while enjoying the extra flexibility of a shorter week. Employer and personal pension contributions can continue AND you delay or reduce the need to access your existing pension savings.

      • PRESERVE CHILDREN’S INHERITANCE - by working part-time and delaying pension withdrawals or reducing what you’d need to withdraw if you retired completely, you preserve more of your pension pot.  This maximises the death benefits of a pension, providing an opportunity to pass more of your money to children/beneficiaries free of inheritance tax. 

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CONS:

      • TAX MAN – receiving pension income and income from employment could result in paying income tax at a higher rate.

      • MORE WORK LESS PLAY - continuing to work reduces the amount of time spent enjoying holidays and leisure activities whilst still in good enough health to do so.

      • MONEY PURCHASE ALLOWANCE – the money purchase annual allowance reduces an individual’s yearly pension contribution allowance from £40,000 (or 100% of salary) to just £4,000 in the tax year. It applies when you begin taking money out of your pension as a flexible income. You can do this when you reach 55.

        If the pension benefits are accessed flexibly, which is common in phased retirement, this reduces the amount that can be put into the pension. This will limit the scope you have to save for retirement and can even result in a tax charge if contributions exceed the limit – contributions from your employer count towards the limit.

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The Pension Freedoms have provided workers with more options in terms of how they access pension benefits. As a result, there are significant tax planning opportunities for those considering phased retirement which can help to mitigate the potential negative tax implications.

Lemonade’s Retirement Options Planner allows workers to input their pension information, so they can easily compare their three options (drawdown, annuity & cash out).  This clever tool also helps them to understand when they can afford to retire which can help with their decision on how best to take their retirement.

 

* Source:  Research conducted by Aegon in conjunction with Opinium, based on responses from 1007 UK workers aged 50+ earning £20k+ between 30 November and 6 December 2018.





Are mortgages delaying retirement?

For most 25-35 year olds, getting on the property ladder is at the forefront of their financial focus.

Which makes sense... Owning a property comes with many advantages;

- The ability to store equity in the property
- The potential to profit from continued growth in the housing market
- Having a place to call your own

However, rising housing prices, while nice for those who already own a property, have only made it more of a stretch for first-time buyers to get their foot on the ladder!

In the last few years, there have been measures introduced to help first-time buyers, such as the Help to Buy and Lifetime ISA’s.

In a more recent move, some lenders have started offering maximum mortgage terms of up to 40 years (up from 35 years) and increasing the maximum mortgage age to 70 (up from 65).

So what does this mean?
A longer mortgage term generally results in lower monthly repayments, even though you’ll pay interest over a longer period. Some people may prefer this as it frees up disposable income however, it's worth considering how this might affect your intended retirement age!

For anyone planning to retire at age 65, this would mean taking out a 40-year mortgage at age 25, and for many, owning a property by age 25 is fairly unrealistic. Therefore anyone aged 25+ may need to consider pushing back their intended retirement age to ensure their mortgage is paid off before they stop working.

However, it's not all doom and gloom as lenders will now consider mortgages that run into retirement. This does mean meeting eligibility criteria, such as providing proof of retirement income. This may be difficult for anyone in their late 20’s and early 30’s to determine but could be provided at the point of remortgaging in the future.

Is renting such a bad thing?
If we look at other parts of Europe such as France and Germany, the share of rental property far outweighs home ownership. In Berlin, for example, the rental property share is 90%. Although this means you’ll continue paying rent into retirement, it takes away to pressure of trying to save an enormous deposit. It also means people aren’t fixed to an area, they can travel or move elsewhere at a months notice, without worrying about the time and cost involved with selling a property and most importantly it shouldn’t affect your retirement age as there are no borrowing age/time restrictions and the rent can be built into your retirement planning.

 

Disclaimer :- Your property may be repossessed if you do not keep up repayments on your mortgage

53% of schemes first contact members about their options within a year of retirement!

Pensions Age - 53% of schemes first contact members about their options within a year of retirement!

In the news! Our pension freedoms research has been featured by Pensions Age!

So here is a little snippet... You can read the full article HERE.

Over half, 53 per cent, of pension schemes leave it to the point of retirement, or within a year, before first contacting members about their retirement options, new research has found.

Despite leaving it late, a survey by Lemonade Reward, of 60 companies with 3.6 million members, found that 90 per cent of schemes do provide support for members, but few rely on in-house tools.

Commenting on the research, Lemonade Reward managing partner David Pugh said: “Organisations clearly want the best outcomes for members, but are struggling with the tools they’re using and their communication timing. Our research shows it’s important not to rely on a single information source for the answers and the sooner you open dialogue with members, the better they understand the options.”

Download the research HERE !

Does retirement really mean no more work?

Does retirement really mean no more work? 

The most common question we come across from employees when it comes to their pension is, what age will I be able to retire? Which makes sense, it’s the whole reason we put money away each month!

Well, according to research completed by the Post Office, 1 in 5 people are forced back into work following their retirement! This is a scenario, I’m sure, that most of us would ideally like to avoid.

This is most likely down to a lack of sufficient planning. For retiring members, it can be complicated trying to figure out not only a life without work but exactly how much they are going to need to get by!

We found from our research that 83% of members are in the dark when it comes to when they will be able to afford to retire, which would go some way in explaining why 1 in 5 are having to return to work after retirement, because of poor planning and uninformed members!

A few things put in place will go a long way ensuring your members are fully informed and aren’t left in a situation where they are forced back into work.

Access to a portal and tools - Providing employees with 24/7 access to an online retirement income modeller is a game changer when it comes to retirement planning and financial education!

Access to advisers - Having a chat with an adviser will go a long way in clearing points up and discussing the numbers further!

Early communication - Communication 5 or more years before retirement means members are 2.5 times more likely to understand when they can afford to retire!

Everyone's circumstances are different, and retirement can throw up some costs that were never expected, but early planning and the correct support can ensure employees are as prepared as possible for a happy retirement!


By David Pugh - Managing Partner

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6 EASY STEPS TO CREATING THE PERFECT FOCUS GROUP

Focus groups are a great way to gain insights from your audience, they can serve as the first step to developing business cases, gaining results at the end of campaigns or just checking in on your audience.

In a benefits capacity, they can be used to -

  • Get feedback for introducing new services such as websites or new benefits
  • Understanding where education needs to take place for instance with pension freedom options
  • Managing change such as provider switching

Whatever your motivation, following these steps will ensure you're well on your way to a successful focus group.

 

Work out your goals

Before anything, you need to work out what you want from the Focus Group. Are you ratifying new website designs? Working out how best to communicate to a group? Understanding your target audience better? 

It’s really important to be clear and set your goals as this will guide you on the right track from the off!

 

Define your target audience

Now that you’ve set your goals, you should have a clear idea of the audience you want to target. Demographics to consider are:

Gender / Age / Job role / Relationship status / Income range / Interests / Location

You can be as broad or as targeted as you like, it’s really all down to what you want to achieve. Adding detailed criteria will give you richer data but will make recruiting participants more difficult, but not impossible!

 

Reaching out to your participants

This can be the most difficult part. Unless you’ve hit the jackpot and your prospective participants all sign up within 10 minutes of communicating (dream on!), you may have to incentivise the process. A voucher, free trial of the product or FOOD can be great ways of getting people to sign up. 

Make sure your communication is targeted, clear, simple and engaging. A few small details like date, time and location will suffice. It’s all about getting their attention. 

The ideal size for a focus group is around 10-15 people. This will give you a good spread of people and give all participants a chance to speak their mind.

 

Designing the questions

One of the main aims should be to stimulate rich conversations, so steer clear of closed questions and keep them open. Ratings can be good to get simple and powerful statistics on how people feel about something, but make sure you follow that up with a question that probes further into why they gave that answer.  These also provide greats stats that you can report back on and hopefully see a % increase in vital areas. 

The amount of questions does all depend on your the subject matter and the time you have allocated for the session, but keep them simple and to the point. If you go off track, people will lose interest. 

 

Running the session

Whatever the subject matter, you can always make it fun for the participants! Make sure the session is interactive and fast paced, this will keep people engaged, which will give you the best results. 

You ideally want a moderator and an assistant. The moderator will facilitate the discussion which leaves the assistant with the important job of recording the session, taking notes and making sure things are running to time. 

One of my pet peeves, are unoriginal icebreakers. Be a bit different! They can be as obscure as you like, or you can use this to get to know your audience even better. 

At the end of the session make sure the participants know how valuable their answers have been, and how the results will eventually benefit them. Thank them individually and send them away with the leftover biscuits. 

 

Analysis

This is the exciting part - seeing the hard work come to life in raw data. Open up Excel, input all the answers including transcription of any recordings. Make sure you’ve captured all answers however positive or negative, it will all help shape how you move forward with the project. 

Make sure you’ve got clear categories and you can filter the demographics you set out, pull out key insights and devise a report outlining the major findings. 

 

Conclusion

Running focus groups will give you invaluable audience intelligence. So many projects fail due to a lack of understanding of the audience and blindspots that go unnoticed when you and your colleagues have been immersed in the subject matter.

Over the last year we used Focus Groups to help build our Retirement Options Planner. Designed to be an easy to use tool to show where an employee is currently at with their retirement plans. Listening to the viewpoints of a wide range of different people who are approaching retirement has enabled us to build a solution that is truly fit for purpose. 

 

We have also used Focus Groups with an existing FTSE 100 client. As the pensions communication partner, it’s imperative we understand their employees and the communication techniques  that work for them - as every workforce is different. It helps us with ‘the now’ and throws out interesting trends for the future to keep us one step ahead. 


So be clear on your goals, target your market, design an engaging and concise session, analyse the data fully and produce a report to take forward.

By David Pugh - Managing Partner

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