A recent FTAdviser report confirms that 47% of advisers worry their clients are at risk of running out of money in retirement.

Managing your pension withdrawals isn’t easy.

Whatever retirement option – or mix of options – you choose, there will be competing factors to consider when you come to withdraw funds.

While some factors will be linked to your chosen retirement lifestyle, other external factors like inflation and stock market performance could also have a bearing on the pension withdrawals you make. But The Pension Planner can help.

Keep reading to discover five reasons why advisers worry their clients could run out of money in retirement. Plus, learn how we can help to make sure it doesn’t happen to you.

5 reasons your adviser might be concerned about your retirement withdrawals

1. Investment volatility

Of the advisers surveyed, 67% answered that they were worried about the impact of market volatility on their clients’ retirement funds.

With a traditional annuity option, your defined contribution (DC) fund is calculated on a given date and used to purchase an income paid to you for the rest of your life.

Flexi-access drawdown, though – introduced when Pension Freedoms legislation came into force back in 2015 – works differently.

You can take flexible withdrawals as and when you like, while the remainder of your fund value remains invested. This means it has the potential for further investment growth but your value can also fall if the stock market drops.

Global financial instability is increasing volatility currently and this could be a real worry if not managed correctly.

Economies struggling to recover from the pandemic have been hit by rising inflation, supply chain crises, and the effects of Russia’s invasion of Ukraine.

Withdrawing pension funds when markets drop means you have to sell more units to arrive at the same level of income. This can eat into your funds quickly if you don’t keep a check on it.

2. Rising inflation

Rising inflation decreases the buying power of your pension pot. This means the money you take out won’t go as far.

It also means you need to keep a closer eye on the money you withdraw. If you take out more than you need, the sum will likely sit in your cash savings account.

With inflation high and bank savings rates low (despite the Bank of England’s recent string of base rate rises), your excess funds could very quickly begin to lose value in real terms.

It is for these reasons that 59% of advisers worry about the impact of inflation on their pensioner clients.

3. Running out of money

The main reason it is important to keep track of your retirement withdrawals is to ensure you don’t run out of money. And yet 51% of advisers worry that their clients are in danger of doing just that.

The rising cost of living is increasing household bills and lowering the real-terms value of cash savings.

Some of your income – like your State Pension, for example – rises to combat inflation through the triple lock. It is unlikely, though, that you’ll be able to live your desired retirement lifestyle on your State Pension income alone.

Careful budgeting is needed, and with so many competing factors influencing the amount of money you can take out, and when, seeking professional financial advice is key.

4. Longevity risk

Rising life expectancies in the UK mean that your retirement might last for 30 or 40 years. And yet, the FTAdviser report confirms that 49% of advisers worry their clients are neglecting to account for this.

At The Pension Planner, we can help you budget for all of your retirement years.

By understanding that your retirement outgoings won’t be static, we can help you to plan your income through the active years of your retirement and beyond.

Planning for a 40-year retirement also means factoring in the potential costs of later-life care or making tax-efficient plans for what will happen to those funds if later-life care isn’t required.

5. Withdrawing against advice

Survey responses confirmed that 47% of advisers worry that their clients will run out of money by making withdrawals that go against their advice.

When we make a long-term financial plan for you, it is based on a holistic look at your entire finances.

We’ll consider your income now, your potential income streams in later life and the outgoings associated with the retirement lifestyle you wish to lead. We can then use sophisticated cashflow modelling software to help you decide how much you need to put aside and how much that will give you to spend.

As we have seen, external factors can have a bearing on this – from the markets to inflation and global conflicts – and this is why we review your plan regularly to ensure it remains on track.

We also understand that life events mean your priorities can change. If they do, your plan is allowed to change, too. Just be sure to get expert financial advice to ensure your proposed changes are feasible, or whether alterations to your plan will be required.

Get in touch

Whatever aspect of your long-term retirement plans you need help with, get in touch. At The Pension Planner, we can help put a plan in place that ensures you won’t run out of money when you need it most, so email info@thepensionplanner.co.uk or call 0800 0787 182.

Please note:

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.