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SJP’s Claire Trott highlights adviser role in multi-generational retirement planning

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Advisers should be involved with families in order to understand the dynamics and any requirements for the funding of other generations either in or before retirement, says Claire Trott (pictured), head of pensions strategy at St. James’s Place.
 

Trott’s comments follow on from a recent study by St. James’s Place into intergenerational wealth and retirement planning which found that just under 25 per cent of future retirees expect to provide financial support in retirement to someone other than their current partner, such as children, grandchildren, a former partner or a partner’s children.
 

This compares with 7 per cent of current retirees who already do so. It also highlights how retirement income will increasingly need to stretch across generations within often complex family structures, states the report.
 
Trott explains that advisers should aim to have long-term relationships with families, because by doing so they can give personalised, trusted advice. “If the adviser doesn’t have the full picture it is very difficult for them to give any constructive advice,” says Trott.
 
“Families often find it hard to talk about money, therefore involving a professional from an early stage should help break down these barriers. This will provide a better outcome for all involved,” she says.
 
Trott believes that despite the multi-generational aspect to retirement advice, succession planning as a concept will remain mostly the same. However, she believes that planning in a client’s lifetime will change. “When multiple generations of the same family are relying on their built-up wealth rather than ongoing earned income, planning becomes even more important,” says Trott.
 
Advance planning ahead of retirement clearly shows a better outcome for those in retirement. The survey found that 79 per cent of those who receive ongoing face-to-face advice believe they have sufficient funds to fulfil their retirement plans, compared to 35 per cent who don’t receive advice.
 
“An issue for those who don’t take advice,” says Trott, “is how to determine if the choices they have made are the right ones and even if they are, they may not stick to their plan. Investing and pensions need a long-term plan that should be reviewed regularly and tweaked accordingly. Sudden or erratic changes of direction can have severe consequences to long term outcomes.” 
 
“When you are dealing with multiple generations then this could have a significant knock on effect to each generation.”
 
The head of pensions strategy believes that in years to come “we may see people with their own pension scheme as well as multiple beneficiary drawdown arrangements. The beneficiary’s drawdown funds will be accessible from any age and may be taxed as income or even tax free if they were passed down from someone under the age of 75. This will likely mean that their own pension funds won’t be touched for longer and so are more likely to be passed onto the next generation. This, of course, won’t be the case for everyone, but the pension freedom changes in 2015 have made this possible and more likely.
 
The tax efficiency of pensions generally means that they are used last as income, for those that take advice,” adding that “with an estimated 1.2 million families expected to contain more than one retired generation by 2039 it will require a reassessment of how people plan for the later stages of life.”

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