Expert: Claire Felgate, Head of International, Global Consultant Relations, GSAM Facilitator: Roderic Rennison, Catalyst Partners
Headlines:
- The growing challenge and burden of securing retirement income has moved from governments and corporations to individuals, particularly in the UK
- Despite auto-enrolment improving savings rates, concerns remain over whether current contribution levels will be enough to sustain retirees
- Retirement solutions need to be simple, flexible, and understandable for clients, who often struggle with complex financial concepts
- Demand for ESG and ethical investments is growing, but communication and regulation are key hurdles
- Technology presents an opportunity to close the advice gap and provide more cost-effective and accessible retirement planning
Discussion points:
Acknowledging the increasing responsibility on individuals to convert their savings into a sustainable retirement income and how the shift from defined benefit schemes to defined contribution schemes is a major factor driving this trend, particularly in the UK.
Adequacy of retirement savings
While auto-enrolment has helped boost participation in pension schemes, there was broad agreement that default contribution rates may not provide an adequate retirement income.
The importance of financial literacy was underscored, and the extent to which many individuals do not fully understand the long-term impact of their savings decisions.
Retirement income products and solutions
The role of asset managers in creating retirement income products that are both simple and flexible, allowing retirees to draw a sustainable income.
The need for effective communication strategies to explain these products in accessible language, focusing on outcomes rather than complex features.
How technology and digital solutions can help bridge the advice gap, providing scalable and cost-effective retirement planning services to a wider audience.
Sustainable and ethical investing
ESG investing is an area of growing interest, especially among younger generations, though demand from retirees remains mixed.
The challenges in clearly defining sustainable investment strategies and managing client expectations, particularly around potential performance trade-offs. The introduction of regulations like the Sustainable Finance Disclosure Regulation (SFDR) is seen as both a helpful guide and a communication challenge when labelling products.
Challenges in communicating complex financial concepts
One of the key challenges is the difficulty in communicating the nuances of retirement income products to clients. A more client-friendly approach that simplifies financial jargon and clearly illustrates the benefits of retirement strategies without overwhelming clients with technical details is needed.
Key takeaways:
- With the shift of retirement planning responsibility to individuals, the industry must enhance education around retirement income planning, especially to younger generations who are still in the accumulation phase
- Although auto-enrollment has increased participation in retirement saving, contribution rates may not be sufficient to secure an adequate income in retirement. Raising awareness and encouraging higher contributions are necessary steps
- Retirement products must be simple to understand yet flexible enough to accommodate varying client needs and preferences. Asset managers need to focus on creating solutions that offer clarity without sacrificing the adaptability clients require
- The retirement planning advice gap remains significant, but technology - especially in the form of robo-advisers and digital platforms - presents an opportunity to deliver cost-effective advice at scale, helping more individuals access the guidance they need
- Sustainable and ethical investing is gaining traction, especially among younger investors. However, clearer communication on ESG approaches, as well as alignment with regulatory frameworks like SFDR, will be crucial to meeting client demand effectively
- Retirement planning solutions often fail to resonate with clients due to overly complex explanations. The industry needs to refocus on outcome-based communication that clearly articulates the benefits of retirement income products in simple, relatable terms
