Over 50% of advisers are unhappy with the range of retirement products on offer, a survey by Invesco reveals.
Navigating pension freedoms without guidance can be incredibly difficult and a survey by Invesco, published today, has highlighted how a knowledge gap is preventing good retirement outcomes for savers.
The study involved 151 retirement-focused advisers and 500 consumers with at least £50,000 in defined contribution (DC) pensions, either at or in retirement.
The biggest fear for pension savers is running out of money, which leads 32% of surveyed people to spend less than they could afford because they dislike the idea of their savings going down. Top concerns were health costs (35%), worry about seeing their savings post diminish (32%) and a desire to leave an inheritance (28%).
For some, retirement also brings unpleasant surprises – a quarter of the people surveyed had less income than they expected upon reaching retirement age. Fear of outliving their savings also led some to an unnecessarily frugal retirement and a reduced quality of life.
And yet, almost 30% of non-advised retirees don’t actively seek any retirement information, creating behaviours that are often a result of misconceptions.
Advisers pointed to three major misconceptions among their clients: underestimating how much they need to save (51%), understanding their life expectancy (47%) and miscalculating likely retirement spending (46%) – all of which the survey attributed to low pension engagement throughout the accumulation phase.
Greater involvement from the savers’ part might lead to more emotional wellbeing, with advisers saying that people who seek advice during accumulation have a better understanding of pension options (64%), are more confident in their retirement plans (53%) and have more realistic expectations for their lifestyle in retirement (47%).
At the same time, however, the financial benefits of early advice are not as tangible as might be expected. Only 37% of advisers said their advice led to clients taking more appropriate risk levels, while 25% said it contributed to larger pot sizes.
Another key point emerging from the survey was dissatisfaction with the available product offering, with just 10% of advisers saying they are “very satisfied” with current retirement products, while a whopping 51% reported no satisfaction whatsoever.
This shows how the industry has not adapted to the needs of retired savers today, despite DC pensions increasingly becoming the dominant source of retirement income, the report read.
For Mary Cahani, head of DC client engagement at Invesco, the uptake of financial advice, the adequacy of pension savings and the quality of decumulation products have now become “significant challenges”, she noted.
“Addressing these issues has become an urgent priority, especially following Rachel Reeves’ Mansion House speech, which emphasized the need for a comprehensive pension review,” she said.
“Collaboration and member engagement need to be represented earlier in the process, particularly during the transition from saving to spending, so that individuals are better equipped with the necessary advice and guidance when looking to access retirement solutions that ensure an adequate level of retirement income.”