Retirement Income: The price of freedom – Adviser Research

“The price of freedom is eternal vigilance” (Wendell Phillips 1811-1884)

Four years since the start of the pension freedoms people coming up to retirement, their advisers, and providers continue to navigate the most effective and efficient way to use pension flexibility while also balancing the various risks that come with this freedom of choice. This brings opportunities, but also risks and challenges for investors, advisers and providers alike.

Since our last foray into the retirement income market (in 2015) things have moved on significantly: we have seen major provider mergers, a whole host of new retirement income solutions entering the market, the rise of equity release as a serious option for funding retirement and, increasingly, a set of retirees who both want to have their cake and eat it.

Back in 2015 we saw a strong anti-annuity feeling among both consumers and advisers. This, without doubt was, at least partly, driven by media coverage and the positioning of annuities as the ‘enemy of freedoms’. Fine – but guaranteed income remains one of the key requirements for the majority of retirees. We are now seeing the realisation that annuities will continue to play a part (even an increasing part) in the average income strategy play out. This is not to say that everything is rosy in the annuities space. Clearly it is not. Rates are still particularly low and advisers tend to view them as poor value, but necessary in most cases.

Equally there remains a gap between what advisers believe should be done to ensure best client outcomes and the current retirement planning infrastructure. Of particular interest is the 72% of advisers who agree that there is a need for a more robust, and centralised retirement income planning process. This figures, as a) most advisers will be typically managing money for longer due to both greater numbers selecting drawdown and continued management of money post-death, alongside b) the inevitable increasing complexities of decumulation. Yet, four years on from the  pensions freedoms and we still see 39% of advisers accepting the still need to implement changes to their processes. Interesting.

Our research unpicks all of this in greater detail and points to the providers of (particularly packaged) retirement income propositions that advisers view as market leading. But there are also clear gaps, or required improvements, in adviser planning processes and their market knowledge. For the providers that get their message right, while helping advisers to address these issues, there are opportunities to exploit.

Phil Wickenden
Managing Director, Research

Please do get in touch if you would be interested in finding out more about Cicero’s Retirement Income adviser research.

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Phil Wickenden

Managing Director, Market Research

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