Financial services needs to quickly learn the lessons of pension freedoms

  • Advisers are busier than ever with the provision of retirement advice post-freedoms and expect most new business to come from at-retirement clients with funds of £100,000 to £250,000 in 2018/19.
  • Advisers’ main investment/planning concerns for clients at- or post-retirement are -investment volatility, running out of money and sequencing of investment return risk.
  • Advisers see service delivery standards, range of product/fund solutions, financial strength/sustainability and digital/online capability and functionality as the key requirements for providers to be successful in this market.
  • Just over half of advisers are satisfied with the level of innovation and response post-freedoms, but looking ahead advisers would like to see further development or improvement with drawdown products, guaranteed capital/income solutions and the cost of products/funds/portfolios in 2018/19.

The financial services industry needs to quickly learn the lessons of the first three years of pension freedoms and work collaboratively on key initiatives to help sustain the delivery of better retirement outcomes for customers, independent financial services consultancy AKG says.

AKG has now published its 2018 Pension Freedoms paper, entitled Grasping the nettle: Working together to achieve better retirement outcomes, which also highlights the need for further development of service and product solutions in 2019/20 and beyond.

Exclusive independent research for the paper, which is sponsored by Prudential and Standard Life, shows advisers have never been busier – 77% of advisers say they are spending more time and resources on the provision of retirement advice since the launch of pension freedoms.

In terms of new business expectations, most advisers (67%) feel that it will come from at-retirement clients with funds of £100,000 to £250,000, and 48% say at-retirement clients with more than £250,000.

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Advisers’ main investment/planning concerns for their clients at- or post-retirement are investment volatility (48%), running out of money (45%) and sequencing of investment return risk (41%).

Advisers questioned for the paper say the key requirements for providers to be successful with advisers in the pensions/retirement market are service delivery standards (58%); range of product/fund solutions (54%); financial strength/sustainability (48%) and digital/online capability and functionality (45%).

Looking ahead with advisers, the main areas where they would most like to see further development or improvement in the pensions/retirement market during 2018/19, were drawdown products (46%), guaranteed capital/income solutions (31%) and the cost of products/funds/portfolios (29%).

Matt Ward, AKG: “Without exception, the pension freedoms changes caught people by surprise. The changes have also coincided with a wider period of regulatory and political change and challenge. So, what has been seen initially is three years of adjustment to the new freedoms with further work to be done in 2018/19 and beyond, to then really capitalise on it.”

“Companies across the market must continue to learn quickly from those customers experiencing the initial stages of pension freedoms, and adapt their propositions accordingly, to better target future business opportunities and to help people achieve positive outcomes.”

“But we have already seen that it won’t all be one-way traffic in terms of opportunities realised, and that there will be challenges and casualties along the way.”

“The key to successful manufacturing and distribution will be intrinsically linked to the key retirement planning considerations for customers. Companies must therefore take heed of the concerns and requirements of their prime audiences – financial advisers and the end customer.”

AKG carries out assessment of a broad range of companies across the financial services industry, including the monitoring of evolving business strategies, and has therefore been in a great position to watch the post-pension freedoms market unfold. AKG’s initial pension freedoms paper was issued in July 2015.

AKG felt that it was crucial to underpin thinking for the paper with original market research findings and so three complementary research exercises were carried out with adviser and consumer audiences to meet this requirement. Findings from each of these studies are illustrated and discussed throughout the AKG paper.

Some of the key objectives for this AKG paper are as follows:

  • To discuss the direction of travel in the market, including provider and solutions landscape.
  • To look at challenges and opportunities, old and new, for a range of market stakeholders and participants.
  • To illustrate through market research, the thoughts, behaviours and requirements of consumers and advisers.
  • To offer practical commentary, insight and recommendations on the post-pension freedoms market.
  • To establish a discussion platform whereby relevant discussion and debate can be further progressed during 2018/19.

The AKG paper is available to download at https://www.akg.co.uk/downloads.

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