In the pursuit of answers, we continue to uncover more questions
Russell WrightSenior Vice President, Defined Contribution
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Earlier this year we launched our Future of Retirement Income publication, bringing together leading voices for a collaborative discussion on the future of retirement income.
Committed to continuing this conversation and encouraging joint action across our industry, in April we held the first in a series of roundtable discussions to delve even deeper into the issues uncovered.
With input from contributors and broader participants from across the industry, we focused on three key areas: communication, investment innovation and guidance and advice.
So what were some of the key themes?
A huge obstacle is changing people’s perception that they’re not just saving ‘to’ retire but that they will need to keep investing and managing their money throughout retirement.
However, there’s still little consensus on what post-retirement investment should look like.
It was unanimously agreed that more innovation is needed to build solutions that can adapt to the changing objectives and requirements of savers in the retirement phase, which are far more complex and varied than in the accumulation phase.
A hot topic of debate was the role of target date funds ('TDFs'), with many participants believing that these structures will move into the mainstream in the UK as they have in the US.
The idea of bucketing your pension pot to meet different retirement needs – such as day-to-day expenses, emergencies, discretionary spending and inheritance – and showing how these could be supported by specific financial assets was also raised.
There was consensus about people needing enough secure income for essential living expenses. Though many raised that what some people see as essential, others see as a luxury (e.g. foreign holidays).
As a result, many felt that there was still a role for annuities in addressing this issue by guaranteeing savers a level of security in their retirement.
Deferred annuities were also discussed, but convincing people to buy an annuity that won’t pay out for years to come was seen as a hard sell.
Sadly, participants were also unanimous in their belief that many people aren’t saving enough and, more worryingly, that they likely aren’t aware of this.
While auto-enrolment can be seen as largely positive, the view is that greater attention now needs to be given to building awareness among members that minimum contributions will translate to a minimal retirement income.
Communications and engagement need to be more focused on helping members join the dots here.
What do Keanu and a discussion on pension communication have in common? Well, Keanu happens to sit perfectly within the age range that most members begin to think seriously about their retirement options (he's 58).
Why is this important? Because another issue raised was the misconception around the average person approaching or just entering retirement. According to Age UK, one in three people think ‘older’ people are incompetent or incapable.
And this is impacting how the industry communicates with them, with some schemes still relying on print-only communication with their older members. We must consider a more digitally-savvy generation of retirees (like the Matrix-surfing Keanu).
But this is just the first step. All participants agreed that, ultimately, we should ask members how they want to be communicated with and tailoring engagement efforts to suit their needs.
It was largely agreed that people need more support, particularly that which extends beyond the ‘at’ retirement stage. For most people, the perfect solution would be financial advice at and in retirement, but this won’t happen for many reasons. So we need to find good solutions that fall in the non-advised world.
But the balance between what is helpful, without straying into the realms of advice, is yet to be struck.
If any of the above points have struck a chord, we’d love to welcome you at our next roundtable debate.
Register your interest here.
In the meantime, please check out our Future of Retirement Income publication for insights from across the industry on many of the themes raised. We're delighted that it's been shortlisted for the Investment Marketing & Innovation Awards’ Content Marketing Campaign of the Year.