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New research shows advice and planning can deliver 49% uplift to retirement income 

08/12/2014

Old Mutual Wealth has today published its first Retirement Income Uncovered report, which shows the positive impact planning and financial advice can have on income levels in retirement. 

Retirees who hadn't set themselves an income target to aim for in retirement have an average income of £17,500 per year, however, those who saw a financial adviser at least once have an average income in retirement of £20,800. In addition, seeing an adviser doubles the likelihood that a person will have a target, and those who had a target and saw an adviser have an average income of £26,000 a year, a 49% increase compared to those that did neither.

Old Mutual Wealth’s Retirement Income Uncovered looks into the level and source of retirement income for people already retired from full time work, plus those over 50 approaching this crucial part of their financial lives. The report provides the first concise picture of current and changing sources of retirement income, changing attitudes to work in retirement and also levels of satisfaction and understanding of the different sources of retirement income.

The study also takes a close look at income drawdown as a source of retirement income, comparing the potential income that drawdown can provide versus a traditional annuity. The calculations show it may be possible to secure the national average retirement income through drawdown with a savings pot 25% smaller than that needed if using an annuity.

Other key findings of the report are:

Retirement reality

  • We expect retirement to last for 21 years
  • 41% of retirees receive less than £15,000 per year
  • There is a £7,000 gap between men and women’s average income in retirement

The changing face of retirement

 

  • Those approaching retirement are 25% less dependent on a final salary pension compared with retired people
  • Those who have a retirement income goal are 63% more likely to be satisfied with their retirement income than those that do not

Planning pays

  • Those who had a target income in mind before they retired have an additional £157,500 income over the course of an average retirement
  • Retirees who used a financial adviser are more than twice as likely to have a target income in retirement – with an average income of £26,000
  • One in four approaching retirement has a target income, compared to one in five current retirees.

The emerging world of pension drawdown

  • Using an annuity to secure average income in retirement would need a pension fund of £237,000
  • The same pot in drawdown could sustain average income for up to 37 years
  • But even as income drawdown hits the headlines only 17% claim to have a good level of understanding of it

 

In addition, the report examines how other income sources are expected to make a greater contribution to the income of those yet to retire. As expected, access to, and reliance on, final salary pension schemes is on the wane and while property downsizing contributes an average of just 2% of income for those currently retired, this rises to a 15% expected contribution for those yet to retire.

Carlton Hood, Customer Director, Old Mutual Wealth says: “Thinking about where your income is going to come from and having a target in mind clearly makes a difference to your outcome in retirement. So does seeking financial advice. More people yet to retire are setting goals that will make them better off in retirement, and our study clearly shows that advice pays.

“What is also clear is that retirement income is changing and people are preparing to use many different sources to fund this stage of their lives. The Retirement Income Uncovered report shows that people are adapting their behaviour accordingly and the picture of retirement income in the UK is not as bleak as some would like us to think.”

The complete report, including regional breakdowns of retirement expectations and the potentially positive impact of using income drawdown can be downloaded from www.oldmutualwealth.co.uk.

Notes to editors:

Old Mutual Wealth partnered with YouGov to conduct research into the attitudes and behaviours of those currently in retirement or approaching retirement.
The research was carried out via an online survey amongst YouGov’s consumer panel.
The sample consisted of 1,536 UK adults aged between the ages of 50 and 75.
The sample was split up into 5 brackets (50-54, 55-59, 60-64, 65-69 and 70+) with a target quota of 300 participants in the research from each age bracket.
YouGov invited a nationally representative sample to take part within each age bracket

Fieldwork was carried out between 4th July and 10th July 2014.

 

 

 

For more information contact

Tim Skelton-SmithOld Mutual Wealth02380 916 99807824 145 076tim.skelton-smith@omwealth.com

Notes to editors:

Quilter is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

On a ‘go forward basis’, Quilter oversees £ 111.6 billion in customer investments (as at 31 March 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset and single strategy investment solutions; and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Old Mutual Wealth’s multi-asset investment solutions business.

The Quilter businesses will be re-branded to Quilter over a period of approximately two years following separation from Old Mutual:

  • Intrinsic to Quilter Financial Planning
  • Private Client Advisers to Quilter Private Client Advisers
  • The Multi-Asset business to Quilter Investors
  • The UK Platform to Quilter Wealth Solutions
  • The International business to become Quilter International
  • The Heritage life assurance business to Quilter Life Assurance
  • Quilter Cheviot will retain its name.

On 19 December 2017, Old Mutual Wealth announced that it has agreed to sell its Single Strategy asset management business to the Single Strategy Management team and funds managed by TA Associates. The proposed transaction is subject to customary closing conditions, including regulatory approvals. 

Quilter is part of Old Mutual plc, a FTSE 100 group that provides investment, savings, insurance and banking. For the year ended 31 December 2017, Old Mutual reported an adjusted operating profit before tax of £2.0 billion. For further information on Old Mutual plc and the underlying businesses, please visit the corporate website at www.oldmutualplc.com.

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