United Kingdom (UK) Post - Retirement Pensions Market 2020

1.1. Many individuals are putting their long-term savings at risk
1.2. Key findings
1.3. Critical success factors

2.1. Most adults retire once they can access the state pension
2.1.1. The SPAhas risen to 66 and there are plans to increase it further
2.1.2. Most wait until they can access the state pension before they retire
2.1.3. COVID-19 could force older individuals into early retirement
2.2. The state pension is insufficient to live comfortably on andthere is agender pay gap
2.2.1. The UK’s state pension is not enough to live comfortably on
2.2.2. The gender gaphas narrowed but still exists
2.2.3. COVID-19 has brought the state pension’s triple-lock mechanism into the limelight
2.2.4. Some individuals saw their pension reduced following the end of the ADI
2.2.5. Single individuals need at least £10,200 per annum at retirement to cover all expenses
2.2.6. On its own, the state pension is at least £2,062.26 per annum too low to enable retirees to pay all their expenses
2.3. Brexit uncertaintyand COVID-19 create a dilemma for individuals planning to retire abroad
2.3.1. Individuals are having second thoughts about retiring abroad owing to Brexit and COVID-19
2.3.2. Brexit negotiations will affect UK pension eligibility

3.1. Retirement income typically comes from several sources
3.1.1. The state pension is key to fundingretirement, but personal pensions are common
3.1.2. More than half of all individuals with retirement incomes in excess of £50,000 per annum live on private/company pensions only
3.1.3. Women have lower incomes in retirement than men
3.2. Retirees have confidence thattheir funds will last through retirement
3.2.1. Lifestyle in retirement is as expected for the majority of individuals
3.2.2. Most retirees do not review their budget frequently
3.2.3. Individuals are confident that their pensions/savings will last through retirement
3.2.4. Confidence that pensions/savings are enough to last an entire lifetime has been broadly unaffected by COVID-19

4.1. Retirees typically have DBpensions, but DC schemes are becoming more common
4.1.1. DB schemes are the most common type of workplace pensions among over 40s
4.2. Pension freedoms give DC scheme members flexibility in howfunds are accessed
4.2.1. New plans are underway to increase the pension freedoms age to 57
4.2.2. DB to DC transfers have been common as individuals take advantage of pension freedoms
4.3. Most over 55s have sizable pension pots, but the majority will access funds as soon as they can
4.3.1. Most over 55s have sizable pension pots
4.3.2. Only a minority of individuals defer taking their pension so it pays more later, while most access their pots as soon as they can
4.4. Accessing pensions for the first time
4.4.1. Full cash withdrawal is the main way of accessing pension pots for the first time
4.4.2. Full cash withdrawals are linked to small pension pots while drawdowns are linked to larger pots
4.4.3. Most pension withdrawals are invested into savings accounts
4.5. Income drawdowns and annuity sales have stabilized
4.5.1. The impact of pension freedoms has faded
4.5.2. The value withdrawn from pensions fell in the first half of 2020 despite fears that COVID-19 would result in a possible spike
4.5.3. Annuity rates reached a historic low in September 2019

5.1. Retirement is a common reason for seeking financial advice, yet uptake is mixed
5.1.1. Retirement is one of the main reasons prompting consumers to seek financial advice
5.1.2. Half of all pension plans are accessed without advice
5.1.3. Uptake of the Pensions Advice Allowance is low
5.1.4. Retirees are less likely to seek financial advice on pensions than other adults
5.1.5. Non-retired adults tend to engage with their advisor on pensions more often than retirees as they explore their options
5.1.6. Reputation and an existing relationship with the advisor are key considerations among over 55s seeking financial advice
5.2. Risks behind pension freedoms and lack of advice remain a concern
5.2.1. Enhanced guidance on pension drawdowns and transfers amid COVID-19
5.2.2. Early drawdowns mean pension funds could last less and limit future contributions
5.2.3. PLSA launches call to improve pension freedoms guidance
5.2.4. Previously, the FCA had introduced several remedies to improve retirement outcomes
5.3. The industry is working on improving awareness of pension income at retirement
5.3.1. The Pensions Management Institute launched RetirementMatters to provide financial education on pensions to individuals exploring their retirement options
5.3.2. The Money Advice Service released a beta income drawdown tool

6.1. Abbreviations and acronyms
6.2. Definitions
6.2.1. Annuity
6.2.2. DB pension
6.2.3. DC pension
6.2.4. Income drawdown
6.3. Methodology
6.3.1. 2020 UK Life & Pensions Survey
6.3.2. 2020 UK IFA Survey
6.4. Secondary sources
6.5. Further reading

Table 1: Top 10 destinations among individuals planning to retire abroad, 2019-20
Table 2: Size of main pension pot of non-retired individuals by gender (all ages), 2020
Table 3: Record low annuity rates drove down average annual pension annuity income in September 2019
Table 4: Annual annuity income change, 2015-19

Figure 1: The SPA is increasing
Figure 2: Most individuals retire at around the SPA
Figure 3: Employment levels among over 65s have dropped since the start of the pandemic
Figure 4: Pensioner poverty has increased in recent years, following a period of sustained decline
Figure 5: The gender pension gap has fallen drastically
Figure 6: Single individuals need at least £10,200 per annum at retirement to cover expenses
Figure 7: The majority of adults in retirement rely on the state pension to some extent
Figure 8: Most over 55s use income from state and personal pensions in retirement
Figure 9: Women have lower retirement income than men
Figure 10: Nine in 10 individuals state their lifestyle in retirement is as expected or better
Figure 11: Almost half of retirees only review their budget once a month
Figure 12: Retirees are confident that their pension funds and savings will last a lifetime
Figure 13: Confidence surrounding pensions/savings has been largely unaffected by COVID-19 for the majority of retirees
Figure 14: DB pensions are more prevalent among those aged 40 and above
Figure 15: There has been a shift from DB to DC plans
Figure 16: Over 55s have flexibility in terms of drawing pension income
Figure 17: A substantial proportion of over 55s believe the size of their main pension pot is over £100,000
Figure 18: The most common reason for deferring claiming a pension is so it pays more at a later date
Figure 19: Over half of all pension plans are fully withdrawn when accessed for the first time
Figure 20: Small pension pots are generally fully withdrawn at the first time of access
Figure 21: Funds from pension withdrawals are commonly put into an instant access savings account
Figure 22: Income drawdowns and annuity sales premiums have stabilized
Figure 23: The value of flexible payments from pensions was lower in the first half of 2020 than in the same period of 2019
Figure 24: Annuity sales started to fall again at the end of 2019
Figure 25: Retirement is a key trigger for clients to seek financial advice
Figure 26: The level of advice forpension withdrawals varies by method of access
Figure 27: Individuals nearing retirement are the most likely to seek financial advice on their pensions
Figure 28: Non-retiredover 55s engage more frequently with their advisor than retirees
Figure 29: Reputation and relationship drive choice of financial advisor among over 55s