Retirement is changing
Welcome – The future starts here
The 21st century has already seen far-reaching changes to the shape of UK retirement and pension provision and it shows no signs of stopping. Staying behind the curve on these rapid advances is no longer an option for providers, advisers, and employers.
Employees need support to make financial decisions to avoid anxiety and poor financial wellbeing surrounding their retirement. Aviva is committed to protecting retirement for the ageing workforce.
What’s shaping the future?
Here are three known drivers of retirement change.
Whatever happens to each driver, we plan to keep you informed.
Life expectancy
Whether your employees are years from retirement or it’s just around the corner, there's a lot to think about, such as how much money to save, and how long it will need to last.
Financial education
Helping employees with their retirement plans isn’t only about explaining their savings options but also building their knowledge and confidence up to and including retirement.
Innovation
Technology is great for having fun, but it can also be used to improve the more serious side of life too, like financial planning.
We can use technology to get employees thinking about, actively preparing for and confidently entering retirement.
Where are we now?
What are the current issues facing retirees?
While many welcomed pension freedoms, flexibility and choice came with greater risk of making poor decisions. Retirees could choose drawdown, which had the potential to address concerns about annuities and the finality of using an entire pension pot to buy one. But what about the longevity risk, where a retiree could simply run out of money?
With auto-enrolment success and the popularity of master trusts, Defined Contribution schemes need to address these concerns. When pension freedoms were announced, it was less of an issue. In the past, more people held at least some Defined Benefits, which acted as a guarantee, but the number of ‘pure Defined Contribution’ customers is increasing while Defined Benefit pension holders decrease.
What are the stages of retirement?
We identified two:
Early – People are more active, often phasing into part-time work instead of full retirement. They may want to make home improvements or take more holidays. Regular drawdown, with occasional easy-access withdrawals from money which remains invested, may be most suitable.
Later-stage – People may be less active with fewer expenses. They may want more certainty, offered by a guaranteed income that lasts as long as they do. Pension poverty is a real concern for some.
What about guidance and advice?
The need for a sustainable, flexible income that will last a member's lifetime will require access to support at the appropriate points. For example, by helping people understand how much income they’ll need for each phase, so they feel empowered to make informed decisions about their future.
Where do we go from here?
Already, traditional pension investment and income models seem outdated. Our industry must develop workable solutions for the future. And that’s why we need to identify what drives and shapes member needs.