Almost six in 10 advisers (59%) said the current environment is presenting more challenges than before the changes, with 66% citing management of client income expectations as the principal issue.
Delving deeper into the matter of balancing risk/return against income, just 16% of advisers believe that clients are prepared to take on higher levels of risk in order to reach their required level of income.
Four in 10 advisers believe that client attitudes to risk and return remain unchanged from the pre-freedoms environment, while 40% feel challenged by having to meet income expectations while keeping clients within their chosen risk parameters.
Richard Romer-Lee, Managing Director at Square Mile Investment Consulting and Research, said: “The provision of income in retirement is one of the biggest challenges and opportunities facing the savings and advice industry. This report provides important insight into how investors and their advisers are thinking about this issue.”
Additional findings by the study included:
The adviser perspective: investor trends
- Advisers reported that their clients are increasingly looking for more flexibility (in terms of where to invest their money, and access to it) with 78% of advisers noticing this as a key trend.
- Clients taking lump sums from their pension and deferring taking an annuity is also a trend noticed by 58% of advisers.
- 43% of advisers reported that their clients are leaving their pension pot untouched and are looking to other investments to generate income.
The investor perspective
- Half of all (pre-retired) respondents (52%) were concerned they would not have saved enough to last through retirement; even when retired, one in three (32%) were still concerned about the sustainability of their income.
- Investors are showing a cautious attitude towards the new pensions freedoms; only one in eight (12%) expected to change their plans; even so, one in four (23%) 55-64 year olds expected to drawdown lump sums from their pension and defer taking an income until later.
- Investors are motivated by the idea of leaving some, or all, of their pension as a legacy: one in three (31%) consider it to be very important. Given this, their key sources of income are likely to be equity-based ISAs (held by 46%): the incidence of other investment products is low and only half have any form of non-investment sources to bolster their retirement income.
