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Advisers best placed to support consumers as over 50% of people are no longer retiring in the usual way

The journey through retirement is changing as over 50% of people are no longer retiring in the usual way, and retirees today predominantly targeted and catered for by financial advisers are growing smaller as a customer group. Classed as ‘Financially mature and stress free’, this customer group, which used to represent almost a third of the market, has already contracted by 25% since 2010 and now accounts for around one-fifth of the over 60’s market today. This trend is expected to continue over the next 15 years, Canada Life today reveals.1 

 

Retirees in this group can be categorised as having very comfortable levels of wealth and health built up over a lifetime of good fortune in employment and family life. The decline of this group can be attributed to societal changes such as fewer people having defined benefit pensions and the declining prospect of home ownership for a generation of renters. These societal shifts stem from changes such as how we; are choosing to spend our time, accumulate and spend wealth, the rise of individualism and the declining relevance of social norms. 

 

A decade ago, almost a third of those in their 60’s and 70s were in this ‘Financially mature and stress free’ category, according to research carried out by Canada Life in conjunction with strategic trends forecasting agency Trajectory Partnership. Today these retirees currently make up around 21% of the retirement market, and financial advisers have built their business models to cater for this group. 

 

However, in contrast to the decline of Financially Mature and Stress Free retirees, two emerging retirement journeys will grow to dominate the retirement market over the next 15 years. 

  • Complex Families, Complex Finances will be the largest group of retirees by 2035, as divorce, second marriages, step children, and the need to support ageing parents all impact their finances. 
  • Late Financial Bloomers, are a small but fast-growing group. These people get married, buy property, have children and build financial stability later in life, condensing the time they have to build wealth for retirement. 

 

Sean Christian, MD and Executive Director, Canada Life’s Wealth Management Division, said: “As an industry we have already witnessed a significant shift in client profiles over the last decade and this trend is only going to accelerate. We need to continue to understand these changes as we work to better support advisers to help these emerging groups of retirees who will dominate the market in the coming years. Advisers are perfectly placed to balance the needs of clients today and consider how the more complex retirement journeys of the future will shift how they support and guide a future generation of clients.”

 

Paul Flatters, Co-Founder and CEO, Trajectory, said: “Just 10 years ago, the largest group of retirees would have fitted into the ‘Financially Mature and Stress Free’ category, but social norms are changing and disrupting the retirement market. Accelerated by the events of 2020, unemployment rates will continue encouraging boomerang children to return to the family home, while divorce rates, second marriages and the likelihood of needing to pay for elderly parents’ care costs are all on the rise. Coupled with the fact that participation in defined benefit pension schemes is declining and we have a generation of renters facing the prospect of never owning their own property, all of which is impacting the declining dominance of these retirees.”  

 

Find out more about the new retirement journeys:

https://www.canadalife.co.uk/unretire/

  1. This research was conducted in partnership with Trajectory, a strategic futures consultancy. It uses horizon scanning to identify the key trends shaping retirement now and in the future (to 2035), to identify a series of new models of retirement or journeys through later life. Horizon scanning is an approach to analysing the future that considers how emerging trends and developments might potentially affect current policy and practice. The research draws on a wide range of data sources and analyses including several ONS surveys (e.g. The Wealth and Assets Survey and ONS Consumer Trends). Other trend evidence was taken from published materials from a wide range of academics and think tanks, as well as Trajectory's own data sources. We analysed data from the UK's Understanding Society Surveys (the world leading longitudinal survey run by The University of Essex) to identify trends in the numbers of people following the different later life journeys and to identify their current size. This was supported by research among 2,000 UK adults, 28th Aug - 1st Sept, 2020, conducted by Opinium Research.
  2. Understanding Society Surveys 2010 and 2018