What advised clients want in pension drawdown – and how advisers can help The first thing to remember is all clients are unique and there is no ‘one size fits all’ solution. Having said that, I am reminded that many clients have a relatively simple request for their retirement pot: ‘Please may I have the largest income this fund can provide and that it lasts for as long as I need it!’ This is where the challenge arises. In the world of defined contribution pensions, investment risk sits with the client. In order to help your client better understand these risks you will need to make assumptions about the future (rate of return, inflation, longevity etc, etc). The one certainty about these assumptions is that they won’t be borne out in practice, so perhaps the name of the game is ‘closest to the truth’ assumptions. In other words; why do I think any assumption I use is more likely to deliver the required outcome and on what evidence is that based. In essence, an evidence based retirement strategy. Within the Thematic Review and associated papers the Regulator suggested, amongst other things, that assumptions should be based on a ‘reasoned and reasonable’ basis and be forward looking in nature. It would be prudent to ensure this methodology is baked into your process and evidenced through your due diligence of product provider/fund manager etc. Figuring Out What Clients Really Need Pension drawdown is a big deal in retirement planning, and clients have some specific wants and needs when it comes to managing their pension money. Knowing what they want helps advisers give better services and make sure clients feel secure about their finances during retirement. Flexibility The top thing clients want is flexibility in their pension drawdown plans. They want to tweak their income levels based on what's happening in their lives, whether it's changing living costs, healthcare expenses, or lifestyle choices. This flexibility makes them feel more in control and ready for whatever comes up. Income Stability Clients also worry about having a steady income. They want to know their pension drawdown will give them a reliable income stream throughout their retirement. A stable income helps them plan better and cuts down on financial stress. Growth Potential Even in retirement, clients are looking for ways to grow their remaining pension funds through investments. This growth potential helps make sure their funds last longer and adds extra financial safety as they get older. Tax Efficiency Nobody likes paying more taxes than they have to, so tax efficiency is a big deal for clients in pension drawdown. They want strategies that lower the tax hit when pulling money from their pension. Advisers need to give clear advice on how to optimise their drawdown plans to minimise taxes and maximise their take-home income. Transparency Clients want to know exactly what they're paying for. Transparency in fees and charges is key. They don't want any hidden costs eating into their savings. Clear communication about all costs involved builds trust and confidence in their advisers. Personalised Advice Clients appreciate advice that's tailored to their unique financial situations, goals, and risk tolerance. They want recommendations and strategies that fit their specific needs. Personalised advice makes them feel more confident about their retirement planning. Regular Reviews Clients want their pension drawdown plans reviewed regularly. They need ongoing support and updates from their advisers to make sure their plans stay in line with their needs and market changes. Regular reviews help them stay on track with their financial goals and make necessary adjustments. Security and Peace of Mind At the end of the day, clients want security and peace of mind in their pension drawdown plans. They need to feel confident that their retirement savings will cover their needs throughout their retirement. Advisers play a big role in providing this reassurance through solid planning, clear communication, and ongoing support. By understanding these wants, advisers can create pension drawdown plans that meet their clients' needs, giving them the financial security and peace of mind they’re looking for in retirement. 4 Income Drawdown
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