Learning Material Sample

Pensions and retirement planning

8. Aims of retirement planning

Learning Outcome 8 Evaluate the aims and objectives of retirement planning including the relevant investment issues

To properly assess and quantify a client’s retirement aims and objectives and their ability to achieve them, it is important for an adviser to gain a full and specific understanding from a client about:

Their available assets and any liabilities that should be cleared

Their income and expenditure - identifying surplus income and any likely increase or decrease

Their provision in the event of serious ill health prior to retirement, which will impact on their ability to provide for their retirement (amongst other things)

The age they wish to retire - the shorter the period to retirement the more pressing the need to act; also, the longer the period to retirement the, less accurate the projections of their future income and expenditure are likely to be

Whether at retirement they intend to stop working altogether or gradually reduce their hours

Their income requirements at ret...

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... based on standardised growth rules set by the FCA. The adviser must ensure that the agreed contributions are - and will remain - affordable to the client. This must be kept under regular review, and if the client is agreeable, automatically increased in line with inflation/earnings.

The adviser must draw the client’s attention to the fact that these projected returns are for illustration purposes only and are not in any way guaranteed, and that the income in retirement will depend on the return on the underlying investments after deduction of any charges. The adviser will also point out to the client that what is of most importance over the term to retirement is the real rate of return, i.e. the difference between the rate of return on investments and the rate of inflation.

What is the key issue that will motivate the client into taking action?

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