"Will my income last?" The question shaping modern retirement planning

L&G recently launched Decades Ahead, a long-term programme bringing together research, policy engagement and real-world solutions to improve people’s long-term financial futures.

Some of our initial research carried out as part of the programme found that 17% of people expect their retirement income to be inadequate, with midlifers (those aged 40-54) more pessimistic than both younger and older generations.¹ 

This is also compounded by a disengagement challenge. For example, 41% of midlifers have not engaged with their pension in the last year.   

For advisers, there is a clear challenge – supporting clients to move from uncertainty and disengagement to certainty and action. 

According to this research, many report feeling overwhelmed when engaging with their pension and this, combined with increased market uncertainty, means that advisers have a powerful opportunity to support future retirees to navigate what is often perceived as a complex retirement landscape.   

As the search for retirement income certainty intensifies, annuities, guided by adviser expertise, have a crucial role to play.   

The role of a guaranteed income   

Our research found that people respond strongly to messaging around security and planning. While over-35s resonated most strongly with security-focused messaging, references to “planning” became more attractive as people grew older. 

The implication for advisers is that clients are now prioritising income certainty and it’s here that they can add tangible value. By introducing clients to guaranteed income products like annuities where appropriate, advisers are able to introduce a known, stable income as part of a client’s retirement income portfolio.  

For many clients, the real value of a guaranteed income is emotional and psychological as much as it is financial. This ‘peace of mind’ benefit was highlighted in previous research we conducted with the Happiness Research Institute, which found that annuity-holders are more likely to report lower levels of stress (51%) and the highest levels of financial confidence (24% vs. 21%) compared to those without one.² 

Advisers are therefore not just able to support clients’ retirement goals financially, they are also able to add further value by helping their clients achieve peace of mind.  

Advisers are also well positioned to underline that clients are able to make the most of a blended approach to retirement income. It’s perfectly possible to enjoy the guaranteed income of an annuity that can help a client secure the essentials, while also benefitting from the growth and flexibility of other retirement income solutions such as drawdown. 

Midlifers: A key advice opportunity   

The sense of certainty, stability, and understanding associated with an annuity positions this guaranteed income product as a key tool at advisers’ disposal, particularly for groups overwhelmed by the uncertainty and complexity of the retirement planning process.  

Midlifers, for example, find themselves in a uniquely challenging position. This generation sits between two eras of pension policy: too young to benefit from Defined Benefit (DB) schemes and too old to feel the full benefit of the introduction of auto-enrolment for Defined Contribution (DC) schemes. It’s no surprise then that a fifth (21%) expect to have an inadequate standard of living in retirement, and anticipate being less financially secure than today’s retirees, their own parents, and their peers.³    

But advisers can play a key role in helping this group make the most of a window of opportunity. This generation potentially has two to three decades to contribute, invest and accumulate savings. 

For example, a 47-year-old earning £46,040 paying into a pension for the first time and contributing the minimum 8% over two decades, could build a savings pot of £116,000 by the age of 67, generating an annual retirement income of £19,162, including State Pension.⁴

However increasing their contribution rate by 1% each year up to 12% could boost their savings to £187,600 generating an estimated income of £23,232, including State Pension.⁵  

For advisers with clients in this age group, there is a major advice opportunity over the next 10-20 years. Not only can they support them to bolster their pension pot through regular touch points throughout their working life, but they can also help them see the bigger picture when it comes to making their retirement income work as hard as it can to help them achieve their retirement goals.

Many in this age group will have only felt uncertainty, complexity, and overwhelm when it comes to planning their retirement. For them, annuities can serve as a great way to reduce the complexity associated with later life planning while also providing a guaranteed income for life.   

Annuities: an essential part of the adviser toolkit   

The changing nature of retirement has meant that financial advice has become increasingly important.  

Advisers act as a key source of guidance for clients who, for both structural and behavioural reasons, often find it challenging to meaningfully engage in retirement planning. With adequacy concerns become an increasingly central concern for clients, advisers have a critical tool at their disposal that can directly help their clients address this challenge.   

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¹ As part of the research, we modelled the adequacy of pension savings for different groups. To estimate wealth at the point of reaching the State Pension Age, we used the Wealth and Assets Survey, the Annual Survey of Hours and Earnings and the Annual Population Survey. L&G’s study uses a new measure of retirement adequacy, Minimum, Replacement, Rent (MRR), which assesses whether retirement income meets a minimum standard of living, replaces a proportion of pre‑retirement earnings, and covers housing costs for renters.  

²Analyses were conducted by the Happiness Research Institute on a population-weighted sample of 3,000 UK retirees that responded to a cross-sectional online survey conducted by Opinium in April 2024. The happiest retirees were defined as those with a life satisfaction score greater than the sample median. 

³As part of the research, we modelled the adequacy of pension savings for different groups. To estimate wealth at the point of reaching the State Pension Age, we used the Wealth and Assets Survey, the Annual Survey of Hours and Earnings and the Annual Population Survey. L&G’s study uses a new measure of retirement adequacy, Minimum, Replacement, Rent (MRR), which assesses whether retirement income meets a minimum standard of living, replaces a proportion of pre‑retirement earnings, and covers housing costs for renters  

⁴ According to the Wealth and Assets Survey, the median pension saving for a 45 to 54-year-old in work is £27,000 (people with defined benefit pensions are excluded)  

⁵Expressed in today’s money terms. Auto escalating from 8% to 12% contributions, increasing by 1% per annum, applied to gross salary. ONS ASHE salary data by age group used for FT salary estimate. Real investment growth of 4.1% assuming a 60/40 portfolio is held throughout [based on L&G assumptions as at 31 Dec 2025]. Salary premium assumption of 1% to age 50 and 0% after. Single life annuity rate as at 19 Feb 2026, RPI-linked, 5yr guarantee. Current state pension of 12,550 pa, increasing with CPI.