Retirement income options on platforms


    Platform providers have clearly had lots on their plate during 2013, including fundamental issues such as post-RDR business and proposition positioning, fund rebate policy and terms ahead of the ban on cash rebates and share class resolution.

    Indeed, some of this ‘engineering’ work will continue well into 2014. All of this has meant that proposition-themed developments, such as the addition of new asset types or product wrappers, have continued to be placed on the back-burner and towards the bottom of the to-do-list.

    We at Defaqto have witnessed development in one area: the growth in availability of DFM services on platforms, typically in the form of managed portfolio services, driven by the increase in demand from financial advisers for outsourced investment solutions.

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    However the general shape of platforms - product wrappers, asset types, tools - has remained relatively static for some time now and the market is in need of some innovation during the next year or two to take them to the next level in terms of their wider appeal to advisers and clients.

    One of the areas that we feel is ripe for further development is the breadth of retirement income propositions offered to financial advisers and clients by platforms.

    This chart gives a overview of what is currently available across the wider market in terms of the products which can be purchased with maturing pension funds at retirement.

    It would be fair to say that many of these solutions cannot be easily accessed through a platform and so financial advisers will often be conducting this type of business off-platform.

    In fact, in our last adviser platform survey this position was well illustrated with the fact that still nearly half of the tax wrapped investments are placed off platform. Interestingly these figures have remained fairly stable for the past two years.

    Due to the fact that the majority of platforms provide access to a flexible personal pension or self-invested personal pension wrapper, either an in-house solution or via a link to a third party product provider, advisers have typically been able to access income drawdown functionality for their clients via these product wrappers.

    According to our research, 85 per cent of adviser platform propositions offer access to capped drawdown functionality, while 76 per cent offer access to flexible drawdown functionality. But beyond drawdown, links to other retirement income product solutions are limited.

    Ability to service clients at retirement

    Our view at Defaqto on this subject would appear to be shared by financial advisers. In our annual platform satisfaction study we asked adviser respondents to consider four statements and choose which best reflected their opinion of how well platforms can accommodate retirement income needs.

    The results are detailed in the table below:

    Thinking about clients approaching retirement, which of the following statements best reflects your opinion of how well platforms can accommodate retirement income needs?
    Platforms are already well positioned to serve my clients’ retirement income needs40%
    Platforms need to further develop the ‘at retirement’ services they offer to serve my clients’ retirement income needs e.g. product wrappers, tools etc.49%
    Don’t know10%
    Respondent base – 452 financial advisers