Why your single clients may need to save more for their retirement

Many of your clients are probably feeling the pinch financially in the current economic climate.

But single people may be facing the toughest challenges when planning for their financial future.

According to recent figures published by the Evening Standard, there are 8 million people struggling to cope with the cost of living crisis solo – and being single costs an extra £860 each month.

Added to this, new research published by FTAdviser has found that single people need an extra £160,000 in retirement than couples.

Read on to find out why and discover three ways that your single clients can boost their retirement savings pot.

A single pensioner’s cost is not automatically half the amount that couples pay

Living alone can be expensive.

A single pensioner will have similar costs to those of a couple living in the same place and sharing expenses between them.

Aside from a 25% single occupancy discount on their Council Tax bill, your single clients will have to cover the full cost of bills including energy, broadband, TV license and so on.

As inflation remains high and mortgage rates soar, people who live alone are under increasing financial pressure in both the short and long term.

To cover the basic costs of living and one holiday a year in retirement, a single person may need to top up their State Pension by several thousands of pounds each year. Conversely, a couple could achieve the same lifestyle by combining their State Pensions.

And it may be even harder for single women who, according to research reported by Professional Adviser, have a 40% lower pension income than men on average.

You could help your single clients by encouraging them to boost their retirement savings as early as possible.

3 ways your client can build a comfortable pension fund for their single retirement

1. Review pension investments and increase contributions

Recent research by Standard Life has revealed that savers are three times more likely to put spare money into cash savings than their pension.

While interest rates are currently high, making cash savings an attractive option, inflation also remains high. This means that the value of cash savings could diminish in real terms over time.

By making extra pension contributions, your client could receive between 20% and 45% tax relief, depending on their income. For example, if they are a basic-rate taxpayer, a £1,000 pension contribution only “costs” £800, thanks to the 20% tax relief.

For higher- and additional-rate taxpayers the relief available is even more attractive.

Your client might also benefit from reviewing their pension with a financial planner who can help them tailor investments to suit their individual needs.

Default pension funds – for example, those offered by workplace schemes – are created to meet the needs of the average pension saver rather than the individual. Consequently, many people accept the default fund unquestioningly.

According to figures published by This is Money, around 90%-95% of people who have a defined contribution (DC) pension through their employer are invested in the scheme’s default fund.

But most workplace and private pensions offer a range of investment options and it’s worth comparing these to the default fund to see which offers the best value for your client’s needs.

2. Make the most of tax-efficient savings

Your client’s retirement savings will likely come from a range of sources including:

  • Workplace pensions
  • Private pensions
  • Savings and investments
  • The State Pension
  • Other income such as from property or investments.

Cash ISAs and Stocks and Shares ISAs offer a tax efficient way for your client to increase their retirement savings. They can contribute up to £20,000 (2023/24) into an ISA without paying Income Tax or Capital Gains Tax on any interest or returns they receive.

Making the most of tax-efficient savings can help them to build up an alternative and flexible source of later-life income.

3. Start investing

Your clients may be wary of investing if they’ve not done it before. Recent research by Lloyds Bank has revealed that half of Brits are intimidated by investing.

However, over a longer time frame, investments have the potential to deliver a greater return than savings, which may help boost the value of your single clients’ retirement funds.

A financial planner can help your client to build a portfolio aligned with their goals and tolerance for risk.

We can help your single clients plan for the retirement they want

Managing finances solo can be overwhelming and stressful, especially during a cost of living crisis.

We can help your single clients devise a financial plan designed to help them to achieve their desired lifestyle in retirement.

If your clients would like to set up an initial meeting, they should email mail@delaunaywealth.com or call 0345 505 3500.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Workplace pensions are regulated by The Pension Regulator.