• 92.2% of UK pension planners would consider an alternative investment in order to quickly and effectively maximise their retirement income
• 88.7% stated they wanted the flexibility in retirement to take tax-free cash and then income at a later date – supporting the April reforms to the industry
• 89.8% declared that they wanted greater control over their investments
• Avacade Future Solutions’ analysis of more than 10,000 UK pension planners reveals a greater need for alternative solutions in line with a rejection of inadequate traditional pensions
On 7 April the government’s pension reforms will come into fruition, providing unprecedented financial control to the UK’s retiree population. From its analysis of 10,000 UK pension planners, Avacade Future Solutions (AFS) today launches the Alternative Generation Report, carried out to further understand the intentions and opinions of the UK pension planner, ahead of the upcoming pension reforms. The analysis unearthed an overwhelming level of support for the government’s plans – with 89.9% declaring a desire for more control over their investments than they currently have. The Alternative Generation report underscored the reforms to be acutely relevant, if not significantly overdue for the overwhelming majority of the UK’s retiree population.
The launch of today’s insights reflect a British public that is ill-prepared by way of savings and time, facts underlined by an overriding lack of motivation to save for their future. Consequently, a vast 92.2% said they would consider an alternative investment in order to maximise their retirement income. For today’s generation of nearly retired, the April reforms have catalysed the ability for greater access to, and ultimate control of funds. Quite evidently, the UK’s nearly retired are no longer willing or able to compromise present-day financial security for that in retirement. Instead, Avacade’s 10,000-strong sample of active pension planners is turning to alternative methods of pension preparation that supports personal desires of a contented pre and post retirement life – an objective for which traditional solutions simply do not accommodate.
In a year that will see the most significant reforms ever to take place in the UK pension system, the Alternative Generation report has exposed an empowered “grey-market” saver as the predominant voice of the UK retirement market. To understand the financial motivations that underpin this continually evolving demographic, in 2014, AFS launched its flagship research study – The Pension Survey Data Report. Key findings from the report were:
• The average UK pension pot of its 10,000-strong database is just £33,000
• Tomorrow’s retirees would subsequently be left with just £39.66 a week in retirement. Even when combined with the maximum state pension, they would be retiring into poverty
• To meet their desired retirement income, the AFS sample required £334,102 – 90% more than the reality of what they were receiving
The pension planner sentiment outlined in The Alternative Generation report is reinforced by a recent study from Aquila Capital. The results revealed an increasing number of institutional investors are turning to real assets – direct investments such as metals, power or forestry – because equities and bonds are failing to deliver their target returns. The study also highlighted that the trend looks set to continue, with 60% of institutional investors polled expecting allocations to real assets to increase in the next three years. Further underlining the UK’s far-reaching appetite for non-traditional products, both amongst pension planners and retail investors, was Avacade’s research in 2014, the Alternative Investment Index (The AII). The study, carried out with around 200 retail investors throughout the UK, revealed that 87% who had invested in an alternative product, such as containers, stamps, fine wine or forestry, would do so again. Supporting the AII report, Coutts Passion Index3 revealed that ‘passion investments’, including classic cars, watches and wine, experienced an average increase in value of 77% between 2005 and 2014 – outperforming shares by a significant margin.
The UK’s shift towards alternative investments suggests an acute, national requirement for speedier, high-yielding solutions to counter the alarming state of traditional pension provisions.
Lee Lummis, Managing Director, Avacade Future Solutions, said:
“The pension reforms announced last year have helped to create awareness around the need to effectively plan for retirement whilst also giving planners the means to grow their pension. We have discovered a generation of pension planners that are seemingly dissatisfied with the more traditional means to do so, and with alternative products performing strongly, it is no surprise they are growing in popularity. Our findings suggest that pension planners are not only aware of and engaged with the reforms to the pension industry but actively support the greater freedoms they will receive. With almost 90% of our sample wanting greater control and the ability to take out a tax-free cash lump sum followed by income, they look certain to benefit from the changes when they come into effect. It is imperative, however, that everyone looking to secure their pensionable years is given the facts and figures about all the options available to them to ensure only a fully informed decision is made.”