How technology can help as people overestimate retirement income by 30%

An empty wallet held by an elderly man.

By AdviceBridge

Many people have little idea about how much they need to save or the level of income their pension savings might generate in retirement.

According to interactive investor’s annual retirement survey, most people tend to be overly optimistic about how much income they are set to retire with.

Source: interactive investor

The research found that the average income of over-65s is £16,540.

And yet, individuals expect to have a retirement income of £21,730 – 30% more than reality. 

Meanwhile, younger savers hope to receive around £25,000 income, which is 50% more than reality.

People become more realistic as they near retirement

In slightly better news, people tended to be more realistic about their expected income as they neared retirement. 

But with 24% of the general population saying they know nothing about pensions, many people could be in for a shock when it’s already too late to make changes and save the money needed for the retirement they hope to achieve.

Head of pensions and savings at interactive investor, Becky O’Connor, said: “While savings are being cut back, often because there is no other option, people continue to overestimate their retirement income by an average of around 30%. 

“The danger is that the cost-of-living crisis leads us head on into a full-blown retirement crisis. 

“With savings increasingly being cut to the bone, it’s crucial that where possible, people think carefully about how they balance medium- and longer-term savings goals.”

Technology can help improve awareness 

Making retirement planning information visual helps improve awareness and can encourage people to take action to improve their situation.

Good retirement planning begins with clear and frank conversations about lifestyle aspirations. With a shared awareness of their life goals, people can understand how much money they need to fulfil their retirement dreams.

This can help solidify their ambitions and focus them on working to achieve the desired outcome.

But the calculations involved in working out what someone needs to factor into their retirement income – the money they have now, the money they can afford to save for their retirement, how long they have before they retire and what they might expect to receive in State Pension – is a lot for people to take in.

Fortunately, technology can break things down and make information easier to digest. 

An intuitive visual aid can help to make the story more engaging

Using a visual interface can help increase awareness of a client’s financial situation and highlight the impact small changes can make over the long term.

AdviceBridge enables you to share a vision of a retirement financial plan and engages clients with its simple and meaningful interface.

With all the relevant numbers to hand, you and your clients can use AdviceBridge to provide a single figure showing what they can afford to spend on a monthly basis now and in retirement.

You can also illustrate how altering their finances will affect their financial situation. Demonstrating how their spending decisions can influence the money they have available now and in retirement can help increase awareness of how small changes can create big differences.

For example, if the research from Interactive Investor is right, there’s a strong chance that a client may need to save more to afford the retirement they are hoping for. You can use AdviceBridge to show this and help the client understand the gap they need to fill.

AdviceBridge allows clients to interact with their pension savings

Giving people the ability to access information about their pension savings on an ongoing basis can help lead to better outcomes.

AdviceBridge allows clients 24/7 access to their information, which they can also update at any time. As their adviser, you’ll receive an alert about the changes in their finances, allowing you to step in and give appropriate and timely advice.

Technology can help make financial advice more accessible

Technology can help make financial advice more accessible – especially for those with smaller pension pots.

Advisers can provide guidance through advice, with light automation or go full-hog and offer a complete robo-advice service for retirement planning based on factors such as client goals, attitude to risk, and how much they have saved. 

It can also be used to personalise pension communications and reports, saving you time.

Get in touch

To find out more about how AdviceBridge can benefit your business and your clients email, book a demo, or call us on 020 3925 3850.