Following on from Bravura’s recent webinar looking at the importance of an advice-led retirement, our EMEA Propositions Lead, Jonathan Hawkins, shares his top five takeaways from this insightful session, which brought together experts from across the UK pensions and Australian superannuation sectors to encourage best practice.
Since the introduction of auto-enrolment in the UK more than a decade ago, there’s been a more than tenfold increase in membership of defined contribution (DC) occupational schemes1. This means – like Australia and other international markets – a large proportion of UK savers will increasingly rely on their DC pensions to ensure that they can live a happy and comfortable retirement.
As savers approach retirement, this could leave people with substantial sums of money, but not necessarily knowing how best to manage it. That’s where advice-led retirement solutions and services come in.
According to recent estimates by Royal London2, nearly 40 million Brits currently don’t take any form of professional advice or guidance when it comes to managing their finances. This translates to three in every four adults being in what we call the ‘advice gap’.
To explore this topic further, we recently hosted a webinar with leading representatives from the Association of British Insurers (ABI), The Pensions Regulator (TPR), the Australian Retirement Trust and the Financial Wellbeing Academy to uncover what the current barriers are to creating a true advice-led retirement offering in the UK, as well as what we can learn from international markets. Read on for the top five takeaways from this insightful and engaging session.
1. Schemes and employers can and should be bolder.
Despite the FCA’s ongoing Advice Guidance Boundary Review, there is still scope for pension providers and schemes to offer advice, as long as the retirement solutions being offered stay within the trust or scheme.
In fact, two of the TPR’s five proposed principles for DC pensions specifically note that savers should be supported to make key decisions in the build-up to retirement. They also go a step further by stating that all savers should be provided with tailored and personalised support in the lead-up to, and during, retirement (decumulation) and in post-retirement3.
2. Digital and data are crucial to delivering advice-led retirement at scale.
With less than 30,000 financial advisers operating in the UK today, expanding financial advice to an additional 40 million adults will be effectively impossible without investment in technology. Firms are already sitting on a huge amount of data and this can be used to personalise their products and services to create tailored advice and better products and services for individuals.
In addition, some of the proposals by the FCA in its Advice Guidance Boundary Review could be game-changing to help get providers to the next level of advice-led retirement. This includes proposals around targeted support, which is a way of personalising advice using data that firms already have on customers to make it fundamentally more relevant to any selected groups.
3. Financial advisers and digital tools are both crucial to tackling the advice gap.
It’s clear that creating an advice-led retirement for millions of UK savers will require technology to effectively scale, but face-to-face interaction will still be critical to providing financial advice at times when members need it the most.
Australia is roughly twenty years ahead of the UK on its DC journey, and digital advice has become a key channel to help members throughout accumulation, while also helping financial advisers be more productive, take on more clients and make advice more accessible. However, when approaching life’s major milestones, people still want to speak with a financial adviser to provide that extra level of reassurance when making their key financial decisions.
4. Advice-led retirement journeys need to be simple.
Another lesson from Australia is that digital advice needs to be clear, easy to understand and actionable. It also needs to be able to generate fully compliant Statements of Advice (SOAs) through self-serve portals. Taking it a step further, the solution has to allow easy implementation of the financial advice. Bravura’s Midwinter solution makes it possible via straight-through processing (STP), which strips out manual intervention.
5. Pensions dashboards provide the perfect platform to start engagement.
Dashboards are creating the ecosystem to deliver advice-led retirement solutions on scale to millions of people. At first, savers might simply use dashboards to check to see if they have any lost or long-forgotten pension pots, which according to some estimates could be worth as much as £50bn in total4.
But, once dashboards are available to the public and post-view services are added to commercial dashboards, we might start to see savers consolidate pensions aiming to save on fees or transfer to a provider that offers more value through additional services – such as digital advice or educational tools.
If you missed Bravura’s webinar on The Importance of an Advice-led Retirement, you can watch it on-demand here. You can also learn more about Bravura’s scalable and flexible Integration Service Provider (ISP), Dashboards Connect, and how our teams can help get your organisation Pensions Dashboards ready ahead of your deadlines by clicking here.
Sources:
- 1 https://commonslibrary.parliament.uk/research-briefings/sn06417/#:~:text=The%20policy%20has%20reversed%20the,to%2021%20million%20in%202019.
- 2 https://adviser.royallondon.com/globalassets/docs/adviser/misc/br4pd0007-exploring-the-advice-gap-research-report.pdf
- 3 https://blog.thepensionsregulator.gov.uk/2023/11/15/helping-savers-to-assess-their-dc-pensions-savings-the-principles-that-will-guide-us-the-challenges-we-must-address/
- 4 https://www.telegraph.co.uk/money/pensions/private-pensions/how-to-find-lost-pension-ni-number/
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