Invesco has released a report on the UK pensions industry which has identified a number of opportunities to change it for the better.
The asset manager partnered with NMG Consulting to conduct an extensive examination of the UK retirement income space and compile the Invesco Retirement Study 2024.
The research combined insights from consumers at various stages of retirement, financial advisers active in retirement planning, and senior industry experts.
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One of the main findings was that DC pensions’ growing dominance has lead to a ‘generational shift in retirement income sources’, but expectations have not caught up yet. Recent, DC-dependent retirees are more likely to find their income falls short of expectations compared with those retired longer, the report said.
The report also found moving from saving into spending can be ‘surprisingly difficult.’ Risk-averse retirees often live well below their means owing to fear of running out of money. Financial coaching and retirement income innovation can foster the confidence needed to enjoy savings effectively throughout retirement, the report suggests.
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Another finding was that the benefits of early advice stretch beyond pot size and investments. According to the research, clients who receive advice earlier in their retirement planning journey demonstrate a better understanding of their pension options and more realistic expectations about their retirement lifestyle.
The third key theme in the report was that the current range of retirement income products falls short of meeting retirees’ decumulation needs. Only a ‘small fraction of advisers are satisfied with available options’ the report states.
Related to this, the researchers found there is ‘a clear appetite for innovation in product development tailored to the decumulation phase.’
Sustainable income generation and longevity protection are also top priorities and are driving advisers’ growing interest in hybrid products, Invesco found.
The researchers also noted that multi-asset strategies designed for decumulation are ‘high on advisers’ wishlist’ as they seek to balance income needs with growth.
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