'Baby boomers' in need of retirement planning

The demographic that are the “baby boomers” have now started to, and will, for the next twenty or so years reach the end of their working lives. Britain will have a larger proportion of its population at or in retirement than ever before and as this group of individuals reaches retirement, crucial life changing decisions need to be made. 

These individuals will have witnessed a lot of change. What can now be achieved by a smart watch in seconds would have taken a week for a computer the size of a room in their youth. The world has moved on, but some things haven’t changed: the grasp of an individual’s financial affairs and in particular pensions and planning for retirement seems to have remained firmly rooted in the past. Why is that? 

In some respects these baby boomers have been fortunate. It was in 1948 that the modern compulsory state pension first arrived. This pension was introduced not to provide for a comfortable retirement but to avoid destitution. In remains, on its own, far from sufficient to even cover the basics of existence.

So planning for retirement has been a need for decades. Some of these people will have enjoyed occupations offering the “golden goose” that is defined benefit pension schemes. These schemes first started in the late 1950’s and 1960’s. Aside of some notable setbacks, the following decades saw high inflation, high interest rates and high levels of growth. These schemes along with their money purchase brothers benefited from this. For a time all was good, but as mentioned times change. 

The high yields of the early 1990’s which saw record annuity rates are long since gone and medical advancements prolong the term if not the quality of life. The period “in retirement” is expected to be considerably longer than in the last century. Investment markets no longer act as rationally as they once did. Underlying investment principles often now take a backseat to sentiment in markets that are corrupted by computer controlled quantitative investment funds.

Never has the need for advice when approaching and entering retirement been greater and yet this generation are reluctant to seek it. 

It is often said that individuals are reluctant to release details of their wealth to others but in particular this age group have witnessed the salesmen of the 1980’s selling products as transparent as mud. They have seen the debacle that was Equitable Life, the misselling of the 1990’s where individuals were persuaded out of their perfectly good defined benefit schemes into money purchase 'at risk' personal pensions. One thing that hasn’t changed is people’s memories of this. 

A deep mistrust of the financial industry has developed and its very difficult to shift this view, but shift it is what we need to do. 

Michael Johnson’s recent paper suggests that the Government abandons individuals at the decumulation stage. The introduction of pension freedoms in 2015 he claims, opens the door for bad decisions to be made. And yet, the pension freedoms also introduced Pensionwise, the non profit body established to provide precisely the guidance necessary to allow individuals to make informed decisions.

The recent introduction of the £1,500 adviser allowance also incentivises individuals to seek advice from what has now become a highly qualified  profession. A pensions dashboard should be working within the next few years enabling the tracking of all pension arrangements. 

The tools are certainly being put into place to help the baby boomers make the right decisions. They must however now be persuaded to use them.