Intelligence: Freedoms and blended solutions

The retirement freedoms have generated a lot of analysis since they were first mooted in the 2014 Budget. But despite us being six months into the new regime, this talk is yet to be matched by action.

But despite the anticipated innovation not yet materialising, a smattering of new product launches have appeared, and advisers and their clients can enjoy much greater flexibility with enhanced access to a range of solutions in retirement.

Now the dust has begun to settle on the new landscape, we used our latest Intelligence report to see whether you were embracing the new possibilities.

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Our first question was simple, asking advisers which products they currently considered as part of a retirement plan (Chart 1)?

The result was perhaps predictable, with drawdown and annuities both suggested by 97 per cent of respondents. The anticipated decline in annuities has not seen them abandoned altogether, although the next question, identifying which products were actually used (Chart 2) saw a much lower response rate for annuities, which dropped to 62 per cent, while drawdown held relatively firm at 94 per cent.

Annuities was still the second most popular product in practice though. Among other vehicles, fewer than half would even consider buy-to-let and only 6 per cent said they regularly used it. The same number said they regularly used equity release, which suggests that, despite renewed regulatory attention, the controversial product is not yet fully accepted by advisers.

Among those who responded ‘Other’ for both questions, Isa wrappers were the most common response. One adviser said “anything that has a value and could be used to generate income or capital” and just one said they still recommended with-profits.

Most prominent among the innovations we have already seen following the freedoms, are ‘blended solutions’ where two or more products combine within a plan. When we asked how often these were used (Chart 3), there was a fairly even spread. The same proportion – 5 per cent – said always as never. There was a slight biased towards their use, with 31 per cent saying almost always versus 15 per cent rarely, but the most common answer was an unsensational ‘sometimes’.

However, when we asked about the future (Chart 4), 89 per cent said they would use blended solutions. Just 1 per cent said ‘never’ with the remainder opting for ‘don’t know’.

We then asked those surveyed to rank various factors in order of priority when it came to choosing products (Chart 5). There was little unanimity in terms of what was most important. The most popular factor – just – was the ability to change income levels in future, but security against funds running out and a guaranteed income were also popular.

Perhaps interestingly, transparency was most likely to be placed last, followed by ability to pass on as inheritance. Bothe of these are issues that have garnered a lot of attention but which clearly do not have the same resonance with advisers. Transparency was also least likely to be placed first by respondents, joint with inflation-proofing