Financial advice can boost retirement target by almost 50%

Retirees who saw a financial adviser at least once have an average income in retirement of £20,800, compared to £17,500 for those with no income target. 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.

However in reality, 41% of retirees receive less than £15,000 per year, and there is currently a £7,000 gap between men and women’s average income in retirement.

The study also compared 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.

However, only 17% of those asked claim to have a good level of understanding of income drawdown, showing that continued advice is needed before the pension reforms next year.

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.”