Article What’s driving the demand for retirement advice in 2024?

Retirement advice will continue to be significant to financial advisers in 2024, according to the latest research from NextWealth. In the sixth annual report, ‘Managing Lifetime Wealth: retirement planning in the UK’, advisers estimated that 53% of the assets they advise on personally are for clients receiving retirement advice. This is, however, a slight decrease from the 58% reported in 2023.  

This article shares a summary of the research – which we sponsored – focusing particularly on the drivers that advisers believe will lead to an increase in demand for advice in 2024. This is contextualised by client objectives and concerns, regulatory changes and the current economic outlook.

Unless otherwise stated, the statistics throughout this article are from the sixth ‘Managing Lifetime Wealth: retirement planning in the UK’ report. The study was conducted with 200 advisers in November 2023.

The top three drivers of retirement advice in 2024

The factors contributing to the continued demand for retirement advice have evolved in the last year. In 2023, the key reasons were the cost of living/market volatility and changes to social care funding. While the current economic environment remains an important factor, the delay in social care reforms has likely contributed to its decline in priority in this year’s results.

Here are the top three factors driving demand for retirement advice according to advisers.

1. An ageing population and medical advances (67%)

People are living longer. Life expectancy at birth has steadily increased in England and Wales since 1841, and 1 in 4 babies born in the UK today can expect to live to almost 100.¹

Being the top driver of demand indicates a growing awareness from clients of the possibility of living longer, and the risk of them outliving their savings. This aligns with the most common concern raised by clients – running out of money before they die.

Clients want their money to last. ‘Using savings to create a sustainable lifetime income while preserving all or part of the capital’ is a key objective for them, according to 83% of advisers. However, this is a significant decrease from the 96% of advisers who noted this as a key objective five years ago. This might suggest competing priorities between clients wanting to prepare for living longer, but also feeling pressure from the current economic environment.

2. The current economic environment (58%)

The economic environment was the top factor of demand for retirement advice in the 2023 report – likely to be driven by the cost of living and market volatility. In this year’s report, the economy is still a top two concern for clients, with rising interest rates and inflation influencing discussions.

Advisers saw an increase in their clients staying in work longer, adjusting withdrawal rates and adjusting wealth transfer plans to cope with the current economic conditions. They also reported a significant increase in the number of clients withdrawing their entire retirement savings in a short timeframe. This year, 24% noted this, compared with only 15% in 2023 and 8% in 2020. While it’s possible that this is due to small pot withdrawals, it’s a trend that will be watched closely in line with the cost of living.

Also noted is an increasing challenge to advisers from clients on the performance of cash holdings versus other asset classes. This follows two consecutive years of higher cash rates. 41% of advisers said the allocation of cash in their clients’ portfolios had increased in the last 12 months – although 55% said this hadn’t changed. A growing proportion of advisers expected the allocation of cash to decrease in the next 12 months.

3. Current tax and allowances (49%)

Changes to pension rules announced in 2023 – coming into effect in 2024 – looks to have also brought clients to advisers. The abolition of the Lifetime Allowance has created many new and evolving considerations. The change in National Insurance rates and the 2023 increase to the Money Purchase Annual Allowance might also be topics your clients are still keen to discuss.

The top client aspirations include maintaining the same standards of living in retirement and assisting their next generations with their finances. With this, comes an opportunity to support clients with optimising their withdrawals across tax wrappers. And providing more tax-efficient options for passing down wealth. 

What’s next for retirement advice?

The findings from this year’s report show that retirement advice is still a cornerstone of financial planning. The changes to some of the key drivers for advice demonstrate the value your advice could provide in a variety of circumstances. Clients are most in fear of running out of money, underpinned by an ageing population and the cost of living crisis. Sound financial advice could be the difference between a modest or more comfortable standard of living at retirement.

With ongoing cost of living challenges, there are concerns from advisers about the affordability of financial advice. While changing rules and regulations might add more complexity and costs for your business. A general election could also further impact market volatility and add more pressure from your clients as to the performance of investments.

Read the full report for more insights

The full report ‘Managing Lifetime Wealth: retirement planning in the UK’  goes into further detail of the retirement advice landscape in the UK. Discover the impact of Consumer Duty on advice and the most significant foreseeable harms facing clients in retirement. Find out what advisers want to see from politicians following the general election – and what they feel are their biggest challenges for the financial planning industry in the years ahead.