We often hear from within the pensions and retirement savings industry that “Retirement is changing”. While that is of course very true, it also misses an important part of the picture. Retirement for savers has already changed, with just 16% of pension savers still seeing retirement as a single event.
As that change continues at pace, sadly much of the industry is not meeting savers’ needs. Fintech startups aren’t a new thing in areas like neo banking, payments and insurtech, where we have seen a wave of technology-led disruption in the last decade. Yet one of the largest markets of all, pensions and retirement, has been mostly left behind, overlooked by lower-hanging fruit elsewhere.
Savers’ lifestyles have changed and in The Future of Global Retirement report we recently published after speaking to 6,000 retirement savers internationally, shows a clear technology gap, perpetuated by legacy systems that just don’t meet those savers’ needs.
The impact of COVID-19
In the last year, COVID-19 has undoubtedly accelerated the trend towards digital transformation and increased everyone’s dependence on technology. However, very little data has previously been available about people’s changing attitudes towards technology when it comes to their retirement savings.
Our study suggests that COVID-19 has accelerated the pace at which retirement is changing, with 16 per cent of over-55s saying they plan to delay their retirement due to the pandemic. We also found there is a growing desire to manage retirement savings and spending without any outside assistance, amplifying the need for solutions that help people understand their financial position and enable them to make better decisions.
Bridge the advice gap before it’s too late
The move from defined benefit retirement savings plans to defined contribution plans has moved financial risk to individuals. A large number of savers now face making their own financial decisions in retirement, and many want to make those decisions themselves. However, with 49 per cent of people not understanding their options it’s clear that savers lack the fundamental knowledge to avoid mistakes, potentially meaning that they’re unable to make the most of their retirement savings.
50 per cent of those who responded and were over the age of 55 have never received any financial advice about retirement, which points to a huge ‘advice gap’ that the retirement industry needs to address quickly. Professional advice is an option but is costly. Technology can unlock the ability to provide guidance at scale, without either prohibitive costs or the inefficiency of blanket education programmes.
Retirement is no longer a one-off event
The traditional model of ‘retirement’ is over – the idea that retirement is a one-off event is long gone, with 51 per cent of savers globally seeing their retirement as a multi-stage journey, instead. We also found that 31 per cent of savers plan to keep doing some type of paid work when they retire. These numbers reflect the large shifts in the way people approach retirement, intensifying the gap between the technology that’s available and what’s needed to guide them on their journey.
Control and flexibility are absolutely vital when it comes to retirement
Control and flexibility are constant themes across savers in all countries. Savers now access their bank accounts online, with a real-time overview of where they stand and have the ability to flex their savings to meet needs as they arise. From our research, 76 per cent would prefer to manage all of their retirement finances themselves. In recognising the importance of guiding savers over the ‘advice gap’, there’s a huge opportunity for the retirement savings sector – and the financial services sector at large – to genuinely support people in reaching the best financial outcomes. In a world where the one-size-fits-all model of retirement is gone, technology can be used to support one-to-one relationships with savers, meeting their individual needs.
The future of global retirement
The concept of ‘retirement’, as viewed through the opinions of those saving towards it, has a broad range of meanings. Traditional ‘retirement’ is over, with few now seeing it as a singular event. Savers have different concerns, and require solutions that are different to not only those of the past but also those offered by the majority of the market at present. Technology, through the outcomes of good technological solutions, offers the answer.
“Retirements are no longer a one-off event, and everybody’s is different. As our systems were built at the individual level, we can personalise every investment journey and strategy,” ays Will Wynne, Co-Founder and Group Managing Director at Smart. “When you get to the end of your working life, you can take the money you have accumulated, break it up and use it in a sensible, flexible way through the course of retirement. You can have personalised investment planning all the way through your life and then flow that into retirement. That hasn’t been possible until now: a truly end-to-end financial life journey that reflects your own circumstances, needs and beliefs.”
Our fully integrated digital platform is approaching one million savers across the UK and other countries, including Ireland and Dubai. Our team is currently hiring a further 100 engineers, supporting our forecast to reach ten million members on the platform within the next couple of years. This scale provides unique insight into the behaviour of members and interactions with their savings, which can be used in partnership with clients to improve the outcomes and overall experience for members.
Just as we have revolutionised the accumulation journey, we are now doing the same for the decumulation journey through our Smart Retire solution, enabling individuals to chart their entire investment life plan from beginning to end.
To read the full report about The Future of Global Retirement you can download it for free at www.smart.co/future