The transition to retirement

    The illuminate debate – part one

    The panel

    Amyr Rocha-Lima

    Partner, Holland Hahn & Wills

    Nick Platt

    Managing director, Henwood Court Financial Planning

    Sarah Luheshi

    Deputy director,
    Pensions Policy Institute

    Neil Bage

    Founder and director,

    Fiona Tait

    Technical director,
    Intelligent Pensions

    Natalie Holt

    Content editor, Nucleus Financial


    Advisers and planners are well-versed in helping clients prepare financially for retirement, yet having the finances in place to stop working is only one part of the equation.

    People’s occupations and working lives are often wrapped up in their sense of who they are, so when that stops it can leave clients leaving feeling bereft, and as if they’ve lost their purpose. 

    Holland Hahn & Wills partner Amyr Rocha-Lima wrote eloquently on this subject for Illuminate last year. He described how a client had up until recently been a senior human resources executive used to managing a multi-million-pound budget and overseeing dozens of staff. But she found herself frustrated as a recent retiree – unable to do simple tasks like getting a plumber to show up on time.

    The psychological adjustment clients go through in retirement is also borne out by research carried out by Harvard Business School. The researchers found the transition to retirement begins smoothly enough, but retirees can struggle with restructuring their lives following leaving the world of work.

    To better understand the shift into retirement, we held an Illuminate roundtable debate to discuss the emotional issues clients may be grappling with, and how the advice profession and wider financial services industry can support clients in making this transition.

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    A personal rebrand

    Henwood Court Financial Planning specialises in working with senior executives and business owners, and managing director Nick Platt has also written a book about how to make the transition from corporate executive to retiree.

    He said: “For those who are planning retirement or in the process of retiring, how they envisage their retirement is a really personal thing. All of our lives are completely different in terms of what we like to do and what we don’t like to do, and retirement is no different. What we’ve found is people who’ve thrown themselves into work 100 per cent need a personal rebranding when they are approaching retirement, otherwise retirement can be quite difficult for them.

    “Retirement used to be about being put out to pasture, and about putting our feet up after a life of toil. That is completely changing, and what we are now seeing is more and more people either not retiring or actually redefining what retirement is, and that can include work as well.”

    Amyr, whose article prompted the debate, said he’s also noticed more clients in the run-up to retirement start “auditioning their new personality”.

    He said: “As they’re planning their retirement, they start talking about joining the rotary club, or starting to volunteer in a particular sector of their local community. That’s what’s great – retirement can be an enabler, to retire from something you’ve done for decades towards something else. I think that’s where the success lies for an individual in that chapter of their lives.”

    Pensions Policy Institute deputy director Sarah Luheshi has seen first-hand how different individuals can approach retirement in different ways.

    Her mother planned her retirement from her early fifties, went on to become a magistrate and had a vision for life as a retiree. Meanwhile, her father just woke up one day and decided he was going to retire, but with nothing in place to support that decision.

    Sarah said: “Some of the work we’ve done has identified that most people try and put off thinking about their retirement until it’s imminent. People don’t know what retired life looks like for them and are faced with the enormity of that decision, which can make it seem quite appealing to then stick your head in the sand about it.”

    Be-IQ founder and director Neil Bage said people can struggle to understand what they want from their future, particularly as that vision is likely to change as time goes on.

    He said: “It’s an interesting psychological dilemma. We all have a vision of what we believe the future looks like. But it’s actually all made-up, or done on a ‘best guess’ basis. Yet every day from that point, that future state gets tweaked and moved in different directions. It winds and snakes, and may ultimately end up in a very different place.

    “This is why when people turn up at the retirement ‘door’, it’s not what they were expecting. I think as humans we have a natural struggle to nail down with any degree of clarity what we really want for our future.”

    Intelligent Pensions technical director Fiona Tait said it’s also the case that people think of retirement in the way they’ve seen other people’s retirements. While people might not expect to stay with the same employer their whole career, they largely expect to do the same role and then stop working.

    She said: “Actually with people working longer and retiring later, what we need to see is transitions to things that might really be quite different in the run-up to retirement. I always think our place as financial advisers is to get the money in place, but the point of the money is to give people choices so that nothing is forced on them. If they want to keep the professional side of life going, or create a more social side to life, then they have that choice.”

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    An evolving financial plan

    Getting clients to consider their retirement, how they’d like to spend that time and to explore any fears they may have, can impact and shape the advice that’s given and the recommendations made.

    Neil discussed how the client’s financial plan needs to factor in behaviour, not only because it drives decision making but because behaviour can change.

    He said: “The plan itself has to be incredibly pliable. For example, clients may come back from a phenomenal holiday experience with their family and realise that this is the kind of thing they want to do more of. That then becomes their motivation to speak to their adviser and change their plans.

    “The planning conversation changes to be geared around ‘these are the decisions you need to make if that’s what you want to happen in your life.’ It’s not just a case of the plan’s in place, job done.”

    Fiona agreed, and said while figures are essential to underpin the plan, the numbers clearly need to be put into the context of what the client is trying to achieve.

    Nick said for those who are planning their retirement, in order for the transition to be successful they need to both have “the emotional capacity to retire, and the financial capacity.”

    He said: “People who are emotionally ready to retire but don’t have the financial capacity to do so could end up in a bad place, because they’re going to work while not really wanting to. What we try to do is give clients the financial ability to retire, and when they’re emotionally ready they can actually retire. But emotional readiness is a big journey, and there’s many steps to get there.”

    Nick said on a practical level this can mean having an initial target age at which to retire, and helping clients change their mindset to put life before work.

    He said: “It’s about changing those habits through baby steps. It might be finishing work at a certain time, not working at weekends, or taking up new hobbies.

    “We call it ‘pre-tirement’ or ‘semi-retirement’ – the client begins to experience and taste what life will look like beyond work, and perhaps find a new tribe of people as part of that. There’s a good quote which says: ‘Retirement is about waking up with enough purpose and going to sleep with enough money’.”

    The concept of putting life first is something that resonates with Amyr, particularly in the context of financial planning.

    He remembers going into one company to give a presentation on their group personal pension, alongside individual pension planning clinics. The workers hired and serviced forklift trucks.

    Amyr said: “These guys were coming in from the cold in their overalls, all greased up. They worked bloody hard for many, many years. Once I understood the power of putting their story first, that conversation between us was an escape. It was a chance for them to see that with the money they’d accumulated, a certain life was available to them that they could either enter into now or phase into slowly. For me, still to this day those were some of the most powerful conversations I’ve ever had in my life.”

    Neil said the challenge advisers and clients have to overcome is balancing the needs of your future self, versus the tendency to focus on the here and now.

    He added: “We are also heavily influenced by society, by the people we hang around with and what we see – all these things influence our decisions. So when the industry message is that retirement/ pensions are things for when you’re old, therein lies the problem.

    “There will be younger generations who say: ‘That message isn’t for me at all’. Combine that with present bias, and that’s an absolutely cataclysmic mess for us to model in our heads.”

    Dying with too much

    Supporting clients in the transition to retirement can make up a significant part of the financial planner’s role.

    Increasingly this means not only planning with clients so they have enough wealth to retire, but also helping them with the emotional or psychological impact of leaving the world of work.

    At our latest Illuminate roundtable debate, panellists discussed how planners and the wider pensions industry can help clients towards making the shift into retirement in a confident, purposeful way.

    Intelligent Pensions technical director Fiona Tait said they actually carve out the shift into retirement as an explicit part of their advice process.

    She said: “We’ve got a process where our client segmentation is based on whether someone is in the saving stage, the transitional stage or the retirement stage. One of the things we’re really interested in is helping people start thinking earlier about what’s coming next, and the government’s idea of a mid-life MOT.

    “I think that is absolutely crucial to help people switch the focus from what they’re putting into their pension, which is giving something up, to thinking more towards, ‘what do I want to get out of my pension?’”

    Henwood Court Financial Planning managing director Nick Platt said most of the people his firm sees are already at that point of transition, because that’s what’s sparked the need for advice.

    He said: “We are seeing a big problem in that people are dying with too much [money], either as a result of under-living or retiring too late.

    “That’s not a criticism, because many people love work and that’s part of their DNA. But we’re seeing a movement within the planning profession towards financial well-being, and that might fit nicely with getting people thinking about retirement through their workplace. Employers could sponsor this, and if by working with a financial planner they can get people to start thinking about this kind of thing then that would be ideal.”

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    Part two

    Click the button below for part two of the debate.