As Gen X approaches retirement age, financial advisers will need to adapt their advice to meet the different needs of this generation.
At the Financial Advice Forum yesterday (September 24), panelists discussed how Boomers generally benefited from more stable pension schemes and a relatively predictable economic environment, while Gen X faces a landscape marked by volatile markets.
The panel looked at the difference in understanding between the two generations and what advisers can do to bridge this.
Daniela Silcock, head of policy research at Pensions Policy Institute, said that while the gap is there, it isn’t as significant as it seems.
“I’m not sure there is so much difference in understanding. Previous generations didn't need to understand, they had an income from the state pension and a income from defined benefit pensions.
“The age at which they left work tended to be around the same age as if they took their state pension and you could leave work early with your DB pension."
She explained that the entire concept of retirement planning is quite new and the issue is there is a gap where people have to make decisions they didn't have to make before.
“We've tried to fill that gap with PensionWise and with other ways of helping people to get financial education and guidance,” she said.
Silcock mentioned some research conducted for pension schemes which found that a third of people are engaged in their financial lives, a third of people could be engaged if they had the right type of interaction, and a third of people will probably never be engaged.
“What that means is two thirds of people are not engaged and these are the people who it is going to be very difficult to get them to make what we would call the right decisions,” she added.
Tish Hanifan, founder and joint chairperson at Society of Later Life Advisers agreed and said with the Boomer generation, more people had defined benefit pensions.
“So if you have to say, what's the one essential difference between the Boomer generation and Gen X, it's the complexity of the decisions they have to make, which leads to inertia."
Meanwhile, Sian Wood, compliance and operations director at Simpson Wood Financial Services, said another way to tackle this gap is for employers to take a role.
“Employers can go a long way to helping the educational piece and investing in employee benefits advisers who can actually make a difference.
“When we're sitting with a client and we're having to say, 'do you realise you're going to have to contribute an extra £8,000 £10,000 pounds a year to reach retirement goals', they often say 'I can’t afford that with the cost of living and everything else'.
“However, if it was explained to them that if a £10,000 bonus that you receive as a higher rate tax payer went into their pension via salary sacrifice, and your employer gave you those national insurance contribution savings, you've got £11,380 a year - you are actually net better off £5,500 by doing that rather than taking that £10,000.”
