Newfound Financial Freedom: Pension Reform in the UK
Historically, retiring in the UK was a straightforward process where the default route for retirees would be purchasing an annuity with their retirement fund, which would provide them with a guaranteed income for life. However, over the past year, nearly every aspect of retirement saving has been revamped.
While there have been hundreds of changes to the pension laws in the UK over the last three decades, the most recent reforms that came into effect in April 2015 are considered to be the most drastic. The reforms, in theory, aim to provide pensioners with a more flexible and personalized retirement strategy as life expectancy rates continue to improve and retirees expect to maintain or exceed their current standard of living. Additionally, the changes will have a positive effect on inheritance planning, especially if one can draw down from an alternative source.
“The pension goal posts keep changing, making it harder for individuals to plan their retirement effectively. Such significant changes raise concerns among pensioners, particularly among those without access to financial advice: the mass affluent customer segment,” says Ashley Globerman, an analyst with Celent’s Wealth Management practice and author of the report.
The pension freedoms also present opportunities for asset managers, such as banks, brokerage firms, wealth managers, financial advisors, and insurers to capture additional assets and new clients through the implementation of new technology, as well as the further segmentation of the market to include products and services aimed at pensioners.
This report will highlight some of the most significant pension changes and their implications on the UK market in addition to defining the mass affluent customer segment, and evaluating how technology can play a role in connecting asset managers with an underserved customer segment.