Last year, it was reported that there were 12.5 million pensioners in the UK, and for many of us the chance to retire at the end of a long career is something to be keenly anticipated. But while retirement can undoubtedly be something to aspire to, we must also be wary of the increased potential for new kinds of vulnerability.
We know that retirement can be a challenging time, with the preceding – and indeed following – years marking some of the most significant changes we’ll experience to our physical, emotional, mental and cognitive health. We’ll see a shift in our social networks, experience deterioration in our cognitive and physical abilities and feel the impact of life events on others more acutely.
In short, while vulnerability can affect us at any age, there are some drivers that can become even more pertinent as we navigate later life. It’s essential, therefore, that advisers are aware of this, and that they understand the warning signs. By doing so, they will be best positioned to ensure a client’s financial wellbeing and peace of mind during their later years.
Drivers of vulnerability
The FCA has identified four key drivers of vulnerability: health events, life events, resilience and capability. Recognising the signs can be complex, requiring an adviser to consistently carry out a task that could prove challenging even for a mental health professional. Nevertheless, they must be able to do so, and must know how to support clients who are found to be in vulnerable circumstances.
Just like any other major life-change, retirement can be broken down into a series of stages. Of course, these stages will occur for each of us at different ages. But advisers looking to understand how best to provide support would do well to understand Atchley’s theory, which breaks retirement down into a series of phases by which we can start to identify some of the most pressing potential vulnerabilities.
The first stage, ‘pre-retirement', most commonly occurs between the ages of 55-64. This period is often one of excitement and anticipation, during which our focus shifts from levelling up in our careers to planning financially for retirement. But there may also be a sense of trepidation. A staggering two-million pensioners in the UK live in poverty and this number is only expected to grow. It’s also worth considering that almost half of those between 50 and the state pension age have at least one long-term health condition, while the number of people providing care peaks at 56 for women and 59 for men. It can be a busy and complicated time, fraught with significant change.
For most people, the ‘big day’ arrives at some point between the ages of 65-74, marking the beginning of the ‘honeymoon phase’. Some research even shows that people in this age group are happier than those in any other. However, this phase typically lasts only a year or two before giving way to ‘disappointment’ and ‘reorientation’, ultimately making it one of the most tumultuous and disruptive. This is also when we start to notice the effects of age on our bodies and cognitive abilities. One-in-two adults aged 65-74 have at least one chronic disease, while government research suggests that the primary challenge for people over 70 is maintaining physical connectivity with others.
Most individuals enter the final or ‘terminal’ phase of retirement between the ages of 75-85. Besides the accelerated deterioration in physical and cognitive health, members of this group will experience bereavement and loss of their social network at a greater rate than at any other time in their lives, with the average age of death in the UK currently 78.6 for men and 82.6 for women.
An additional age group for advisers to be aware of is those who are aged over 85. Despite living longer than the national average, this is actually the fastest-growing age group. But with older age comes continued problems with physical and cognitive health. A large number of people over 85 are thought to be frail, a significant number are widowed or bereaved and of course the ageing process puts a greater strain on our cognitive capability. The potential for vulnerability is incredibly high.
What can be done?
When looking into the drivers of retirement, we know that the support required for a vulnerable client should always ultimately be determined on a case-by-case basis. For instance, if a client is particularly frail, the adviser could visit them at home, rather than asking them to come to the office. They could find different ways to communicate important information if the client is struggling with their hearing or their eyesight or help them to avoid making rushed or unwise decisions with any inheritance they might accrue after being bereaved.
To put it simply, monitoring for and identifying any potential vulnerabilities should be a constant factor throughout an adviser’s relationship with a client. But as we’ve touched on already, the identification process can often be particularly challenging.
Since the announcement of Consumer Duty, the FCA has produced numerous papers, research, and guidance to help with this. Likewise, various industry bodies have published their own support guides. But for those looking to ensure their identification process is as watertight as possible, the best way to identify vulnerable clients is with a third-party specialist platform. A digital assessment, removing subjectivity from the process and ensuring consistency across a whole client base, is arguably the only way to ensure all vulnerability drivers are constantly in scope. By combining clinical expertise with hard data, they’re able to reassure firms that their systems and controls will adequately meet the scrutiny of regulatory requirements. Perhaps most importantly, however, they remove the need – and indeed the pressure – for advisers to correctly identify vulnerability with only their own insight.
In the long run, this process will benefit everyone; clients and advisers alike. After all, retirement can be wonderful, but it’s also a time of significant upheaval. If you’re struggling, or if you know that you need to bring in additional expertise, don’t delay. The tools are out there to deliver the support you need.
