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Flexibility not risk reduction now main priority for retirees

15 July 2018

Three years on from the introduction of the pension freedoms, flexibility has become the leading priority for retirees, new research by Aegon has revealed.

According to Aegon, 54% of advisers said their clients’ number one priority in retirement is flexibility, with risk reduction coming in second at 33%.

The pension provider said the emphasis on flexibility was as a result of pension freedoms and demographic and social change, with many investors retiring gradually over time.

The FCA’s Retirement Outcomes Review, published last July, found that twice as many retirees were going into drawdown than annuities. Alongside the increased interest in drawdown, there has also been a rise in the use of highly diversified strategies.

On average, over two thirds (67.6%) of assets for retiring clients are being allocated to multi-asset and diversified equity strategies. In contrast, ‘traditional’ retirement instruments such as fixed income, annuities and guarantees account for only 22% of a typical retiring clients’ portfolio.

Nick Dixon, investment director, Aegon, said: “Pension freedoms have paved the way for retirees to adopt a new attitude and approach to how they manage income in retirement. Our research shows that flexibility is the watchword for retiring clients, in how they access their money, their level of income and the investment strategy they adopt.

“Demand for advice is rising driven both by the structural shift away from annuities and by the competing needs of investors who require expert advice to help manage complex trade offs.”

 

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