The UK government’s upcoming 2025 pensions review is a golden opportunity to reshape how we approach retirement planning. While there’s been progress in recognising the importance of including rainy day savings and property alongside pensions, stopping there would miss the bigger picture.
Retirement isn’t just about accumulating (and then decumulating) financial capital — it’s about creating a system that values human capital too. Our ability to earn throughout life is a vital piece of the puzzle, and ignoring it risks creating a framework that overly favours financial products over real, sustainable solutions.
For a public already navigating a cost-of-living crisis, this narrow focus could lead to policies that benefit financial institutions more than everyday people. We need a retirement planning system that works for everyone, not just those with the ability to create sizable savings or investments.
The Changing Face of Financial Planning for Retirement
Thankfully, there are signs of change. Industry leaders are starting to question the current approach. Pete Glancy, head of policy at Scottish Widows, has called for a Lifetime Savings Commission to take a broader view of retirement planning. He rightly points out the need to include emergency funds and property in the mix.
While this is a step in the right direction, it doesn’t go far enough. The discussion still overlooks human capital — the value of our skills, health, and earning potential — which plays a critical role in shaping lifetime financial security.
Why Human Capital Should Be Central to Retirement Planning
For most of us, earnings are the foundation of our financial lives. They pay for today’s needs and enable us to save for tomorrow. They also contribute towards our pensions and investments. Yet, when it comes to financial planning, human capital often gets side-lined.
This creates several risks:
Over-reliance on investments: Focusing solely on growing financial assets can leave people vulnerable if their investments don’t align with their needs or underperform due to market shifts.
Missed opportunities for flexibility: Ignoring earnings from part-time work, side hustles, or royalties can make financial plans too rigid, especially during transitions like semi-retirement.
A more inclusive approach would integrate human capital into financial planning, helping individuals build resilience and adapt to life’s uncertainties.
Facing the Big Challenges Head-On
One major reason we need to rethink retirement planning is the rising impact of big global challenges like climate change and biodiversity loss. These unprecedented systemic risks have the potential to disrupt long-term investment returns, particularly relative to rising inflation, and making it harder for pensions alone to deliver the financial security we may expect.
Recent analysis from Ortec Finance highlights how these risks could significantly affect pension fund outcomes throughout the world. This underscores the importance of diversifying income streams in retirement — combining earnings, savings, rental income, and more. By doing so, we can create a financial safety net that isn’t overly reliant on one source.
Broadening the Scope of the Pensions Review
The 2025 pensions review can’t just focus on growing financial products under management. It should take a broader view, empowering individuals to tap into all their resources — human, financial, and social capital — to build lasting security.
Here’s what that could look like:
Reducing over-reliance on financial products: Diversified income streams can provide more stability than investments alone.
Promoting financial literacy: Helping people make informed decisions empowers them to navigate complex financial landscapes.
Reflecting modern realities: Policies need to account for today’s varied work patterns, from gig jobs to second careers.
By shifting focus, we can create a system that reflects the diverse ways people build security throughout their lives.
A Better Way to Plan for Retirement
Retirement planning shouldn’t just focus solely on pensions and investments. To truly thrive, we need to embrace a broader view of wealth — one that includes financial assets, UK property, and intangible resources like skills, health, and networks.
Broadening Wealth Beyond Savings 💼🏡: Wealth isn’t just what’s in your pension pot. UK property can provide rental income or reduce costs, while skills and personal networks are invaluable for creating flexible income streams and building resilience.
Health: Your Greatest Asset 🏃♂️🧠: Good health fuels financial independence. Staying physically, mentally, and socially active helps maintain well-being and promotes longevity. Continuing to work part-time or freelancing adds income while offering purpose and connection.
Redefining Retirement with Purpose ✨⚙️: Retirement can be a fresh start — a time to pursue what you love on your terms. Flexible work keeps you engaged, supports a healthy lifestyle, and diversifies your income sources.
Leveraging All Assets for Security 🌟📊: A holistic strategy combines tangible assets like property and savings with intangible ones like health and skills. This creates a sustainable, fulfilling future that aligns with your goals and values.
Time for Action
As the pensions review approaches, it’s time to broaden the conversation. Policymakers, industry leaders, and individuals all have a role to play in pushing for a system that reflects the full scope of our financial lives.
If we include human capital, consider systemic risks, and embrace flexibility, we can create a retirement planning system that’s fair, inclusive, and sustainable. Together, let’s build a future that empowers people to thrive, both financially and personally.
Retirement planning isn’t just about saving for the future — it’s about building resilience, adaptability, and purpose. Let’s make it work for everyone.
(Images are AI-generated)
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