Pension freedoms and the road ahead

In their latest paper on pension freedoms, entitled ‘Ten Years of Freedoms – Lessons, Gaps, and the Road Ahead’, AKG not only looked back over the ten years since the freedoms were introduced but also considered what the key opportunities for advice firms may be going forward. Here I reflect on these opportunities and also look at the paper’s findings on the key requirements for provider success.

Based on qualitative interviews with representatives from a range of advice firms, the paper found that advisers believe the much heralded ‘baby boomer’ wave of retirement assets and business will continue for the moment but this will not be enduring. However, interview participants seemed remarkably relaxed about the eventual demise of the baby boomer wave. They think the potential impact is greatly exaggerated. New markets and approaches are evolving naturally. There are firms that have specifically focused on ‘family’ as the client unit and intergenerational business is expected to flow naturally. In any case, the common belief is that wealth transfer will always be a source of potential business.

The way in which technology and, notably, AI is developing will allow the development of different and lower-cost approaches and services for younger clients. Several advisers also observed that ways of communicating with younger clients are evolving rapidly and technology is a more integral part of their lives than it has been for baby boomers and their immediate progeny.

Those engaged in workplace-generated business believe that this market will burgeon over the next few years, especially as auto enrolment starts to result in the attractive build-up of assets in individual DC arrangements.

Overall, advisers expect the next generation to be net investors and any problems may actually be lurking further down the line with the generations following on from this. DB is fading out and people will be less likely to be able to rely on the state only in retirement.

In addition to the opportunities emerging from the workplace, some advisers observe the under-realised potential of the female financial services market.

The outlook for providers

Adviser survey respondents were asked by AKG what they believed the key requirements are for a product provider to be successful in the pensions and retirement market in the future. Many factors were considered important, including operational resilience/financial strength (38%), digital/online/AI capability and functionality (36%) and a range of product/fund solutions providing a ‘one stop shop’ (34%). Technical knowledge/support resources/teams (34%) and range of retirement planning apps/tools (33%) also scored highly. 

Commenting on this aspect of the findings within the paper, Paul Richards of Fidelity Adviser Solutions said, “Platforms, with their comprehensive package of solutions and wrappers, are exceptionally well-placed to support advisers and their clients through the whole retirement planning journey – both pre- and post-retirement. Not only do they provide clients with choice and value for money, advice firms stand to benefit as well through increased efficiencies and complementary platform services.”

• Read the full AKG research paper
• Creating retirement income for your clients