Retirement income is being reshaped, with retirees requiring to adopt a ‘mix and match’ approach to income to meet their changing needs, says a new whitepaper from wealth tech group GBST.
The paper, ‘Reinventing Annuities: ‘Mix and Match’ innovative retirement income‘, written in partnership with Simplify Consulting, argues that changing regulation, longevity, wealth and retirement norms are reshaping later life income needs. As a result, advisers and investors will need to take a more ‘mix and match’ approach to retirement income planning, with greater emphasis on guaranteed income solutions alongside the flexibility of income drawdown to support retirees through the different stages of retirement.
At the same time, rising interest rates have resulted in the highest annuity rates in over 12 years, creating renewed interest in the market.
However, GBST said more innovation is needed to fully embrace the opportunities offered by combining annuities and flexi access drawdown as well as ISAs, general investment account and investment bonds. While the technology is available to support the distribution of different retirement solutions within a single tax-efficient wrapper and alongside other retail investment products, the firm said many traditional annuity providers are not yet set up to deliver this.
David Simpson, head of EMEA at GBST, said: “We have no doubt that the various pressures shaping people’s future retirement income needs, alongside the economic impact of rising interest rates and annuity rates will drive innovation within the annuity market.
“We expect to see more products where guaranteed income is paid into a pension wrapper and drawn by the consumer to meet varying needs and tax positions. When these solutions sit alongside other retirement planning products such as ISAs, investment bonds and flexi access drawdown, guaranteed income products start to look like a much more attractive option for advisers and their clients and will become a key component of many retirement plans.”
Simspon said that for providers, administering flexible retirement solutions and other retail investment products on the same technology and across the same operational teams and processes also drives down costs, while improving the service and experience they can deliver to advisers and end-investors.
Carl Woodward, director at Simplify Consulting, added: “Retirement has been badged as pensions for a long time now, and as we explore in this paper, it is much wider than just a pension product. The industry has needed investment, into both products and technology, and it’s positive to see these launching with the potential to simplify and provide great outcomes for the consumer.
“Innovative products and technology combined will hopefully help to address the consumer engagement challenges. The key will be to implement without over complicating an already complex market and having any negative impact on consumer engagement.”
