What does 2015 hold for advisers and the pensions market?
As we move into an era of greater pension freedom, the general public will have more choice and control over how they access the money they have saved for retirement. It will become more important than ever for advisers to help their clients to understand the risks associated with depleting their retirement savings too soon.
Research has shown that people expect to live an average of 18 years in retirement, but they expect their savings to run out after just 10 years. In fact, the average retirement in the UK lasts 19 years, while the average person’s savings run out after just seven. It is important for advisers to support their clients to maximise their retirement income.
Pensions have long been a relatively confusing topic for most people. Changes, such as allowing savers to take lump sums from their pension pot while the fund remains uncrystallised, give greater freedom but will heighten client expectations and may result in funds depleting too quickly. Advisers need to navigate people through the choices that will be available.
A big challenge for advisers as we move into the New Year will be to find drawdown products that enable funds to grow and deliver income for their clients throughout their retirement. It is also important that drawdown solutions maintain their suitability for each client’s specific requirements as customers’ needs can change and evolve with time. We believe income drawdown solutions should offer in-built fund diversification and automatic portfolio rebalancing to maintain suitability, while reducing any administrative burden on the adviser.