Should conveyancers worry about their clients’ retirement?


Posted by Dave Seager, consulting adviser to Legal Futures Associate SIFA Professional

Seager: Show clients you are different

From a SIFA Professional perspective, which is always one that seeks to further financial and legal collaboration, thinking outside of a legal transactional box is second nature. However, when dealing with everyday client matters, often under pressure, we are equally aware that, traditionally at least, solicitors will not always consider or even see wider financial planning implications arising.

In all honesty, although legal processes must be accurate and by the letter of the law, they are also, by definition, highly transactional.

Recent research undertaken by former pensions minister Steve Webb, in his capacity as a partner at industry thinktank and insights provider LCP, highlights that 40% of all new mortgages taken out in the second quarter of 2024 had terms that would take the borrower beyond retirement age.

This, rather alarmingly, represents a big jump from as recently as 2021, when it was only 30%.

The growth is most marked for clients between 30 and 39, where 30% more are taking out mortgages that are set to run into retirement.

Of course, the main driver has been affordability for younger borrowers, due to higher interest rates, but even with recent rate decreases, there is no sigh of the trend changing. As Mr Webb commented: “There is increasing evidence that taking out a mortgage which runs past retirement is an entrenched feature of the mortgage market rather than a blip.”

With his background in pensions, Mr Webb’s obvious concern is that this growing trend will have serious implications for retirement plans. It could lead to these borrowers, if not advised properly, needing to use potentially already inadequate pension pots to clear mortgage balances.

He cautions: “Anyone involved in helping today’s workers plan for retirement must now factor in the possibility that housing costs will run into retirement or will have to be funded from already meagre pension pots.”

On the face of it, this may not seem like a conveyancing solicitor’s problem, or indeed, fall within their area of expertise. However, isn’t that rather the point?

The implications for later life and retirement planning is certainly not within most lawyer’s scope when assisting clients with the legal aspects of buying a home. In addition, most genuine financial planning firms do not specialise in mortgages and the clients therefore will often have been referred direct from a lender, a mortgage broker or an estate agent, none of whom have expertise in retirement planning.

Such referrers are competent in their own business and invaluable as regular introducers of new conveyancing clients to you, but often their driver, or that of their client, has often been affordability, perhaps over suitability.

As Steve Webb suggests, this phenomenon is here to stay so more and more clients you capably assist will perhaps inadvertently, in their keenness to buy their first new home, be jeopardising their retirements.

Therefore, our request to you is simple: when faced with new referred conveyancing clients, where the mortgage in place will take them into their retirement years and the referral has not come from a specialist financial planner, please refer them to one that your firm has done due diligence on and trusts.

Much legal advice or work has financial implications or requires complementary financial planning, and this new trend in the mortgage market is certainly one such area. Undertaking the conveyancing process in isolation may not be in your clients’ best interests and, whilst you are not in any way responsible for selecting the mortgage type or its term, this presents a wonderful opportunity to shine.

Asking them if they have considered the potential impact of their longer-term mortgage on their retirement and offering to refer them to a trusted financial planning partner, will demonstrate that you are different and able to consider a wider view of their affairs.

Certainly, if referring to a quality financial planner, such as those on the SIFA Professional Directory, you can be confident not only that their mortgage situation will be assessed in a fuller financial plan, but that the client will be referred back to you for the lasting powers of attorney and wills that will underpin that plan.

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