Advised clients are still facing challenges, despite a drop in inflation and better economic performance, says Aegon.
In a survey of 200 financial advisers, a third (33%) said they had seen a rise in queries from clients since 2021, with older clients the most eager to understand how they should adapt their financial plans to reflect the difficult economic environment.
More than half of advisers (54%) said the most common action taken by clients was to delay their retirement to work and save for longer. This was followed by an increase in the number of clients choosing to take an annuity (46%), while a third (32%) of advisers reported seeing a jump in those reducing their retirement income.
Yet, despite annuities becoming a popular option, only 11% of client assets are held within them, according to Aegon. Drawdown remains the dominant investment strategy for more retirees, with 67% of client assets invested in such solutions.
Lorna Blyth, managing director, investment proposition, at Aegon, said the research shows that savers and retirees have been struggling to catch up after three years of significant financial challenges.
She said: “It’s interesting to see how recent times have changed advised client behaviour, particularly when it comes to delaying retirement. As financial challenges have mounted, many pre-retirees may have been concerned that their savings would be unable to meet rising costs now, let alone in the future.
“With interest rates having been much higher, it’s also not necessarily a surprise that 46% of advisers we spoke to have seen an increase in the number of clients choosing to purchase an annuity. However, despite becoming more popular, they still only represent 11% of the market by assets held.
“Considering many will have sought greater security during the recent challenges, you would have thought that if annuities were to have their day, it would be now but it doesn’t quite seem to be the case. It’s clear that drawdown remains the dominant retirement strategy for most retirees.”
Aegon’s research also showed that the overwhelming majority of advisers (70%) said their most recommended solution for clients concerned about financial challenges is to stick to their current financial plan, far above the 9% who suggest their clients should switch investments.
Blyth added: “Reassuringly, it would appear that advisers have been keen to focus on long-term outcomes. Retirement saving is a long-term game and making changes that benefit short-term needs could hurt your pension when you need it most in the future. This is a great example of advisers applying their expertise to produce better client outcomes.”
