Newfound Financial Freedom: Pension Reform in the UK

by Ashley Globerman, June 24, 2015
Industry Trends
EMEA

Abstract

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.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Introduction

2

 

Market Overview

2

 

Key Research Questions

2

UK Pension Reform: The Long and Short of It

3

 

UK Pensions Today

3

 

The Challenges of the Pension Reforms

5

The Mass Affluent: Unique and Underserved

7

 

Sizing the Market

7

 

Seeking Advice Amidst Uncertainty

9

 

Characteristics and Digital Adoption

10

The Race for Retirees Post-Pension Reform

12

 

Automated Advice

12

 

Account Aggregation

13

 

Banks

14

 

Brokerage Firms

14

 

Wealth Managers and Financial Advisors

14

 

Insurers

15

Conclusion

16

Leveraging Celent’s Expertise

17

 

Support for Financial Institutions

17

 

Support for Vendors

17

Related Celent Research

18

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