Retirement Income Review: Income withdrawal strategy tops list of adviser learns

by | May 29, 2024

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  • 16% of advisers say income withdrawal strategy is their top Retirement Income Review take away
  • A quarter (26%) of advisers expect the review to lead to better outcomes for their clients
  • Nearly two-thirds (62%) think that providers are meeting changing adviser and consumer behaviour

Income withdrawal strategy tops the list of focus areas for advisers following the publication of the Financial Conduct Authority (FCA’s) Retirement Income Review (RIR), with 16% citing it as their top take away. This was followed by suitability (14%), cash flow modelling (11%) and periodic reviews (8%) according to new research from Standard Life, part of Phoenix Group. The review painted a broadly positive picture of adviser’s approach to retirement advice but noted a number of areas where some firms could improve and provided some guidance on best practice.    

The FCA’s Review was conducted almost 10 years on from the introduction of pension freedoms as adviser approaches have changed dramatically in the years since in response to greater pension flexibility, changes in technology and regulation.  The review looked at how the retirement income advice market is working and whether consumers are receiving appropriate advice on meeting their income needs in retirement. Standard Life’s survey of 200 advisers found that a quarter (26%) expect the review to lead to better outcomes for their clients. However, 44% do not think the review will make any difference to client outcomes. 

Income withdrawal strategy


The top focus for advisers coming from the review was income withdrawal strategy (IWS) which was highlighted by 16% of advisers. The review found that IWS needs to consider current and future income needs and should be tailored to customers circumstances and objectives. The FCA expect this to be illustrated to customers in a variety of scenarios, particularly taking longevity into account. 


14% of advisers highlighted suitability as their top learn. The review highlighted the importance of a full fact find with no gaps or missing information. Identified areas for improvement for some firms included record keeping and exploring areas such as customer vulnerability and expenditure analysis, including the need to identify customer’s minimum income needs and the proportion of this that is for essential expenditure. 


Cash flow modelling

13% of advisers focused on cash flow modelling (CFM). The review found a significant role for CFM in determining income withdrawal strategy and most firms could evidence the checks they had put in place before choosing which CFM tool to use. The FCA said the use of a CFM or a withdrawal rate should be used consistently to estimate sustainable levels of income. This needs to consider current and future income needs and should be tailored to the customer’s circumstances and objectives. CFM’s should take account of inflation, charges and tax and include stress testing scenarios. 

Periodic reviews


8% cited periodic reviews as their top take away. The review found that not all firms had given their customers an annual review and some were unable to provide this information as it had not been recorded centrally.

Advisers were split when asked about the level of innovation and choice among providers. Just over a quarter (28%) say there is not enough choice or innovation in the market, however nearly two thirds (62%) think that providers are already meeting changing adviser and customer behaviour in the aftermath of the 2015 Pension Reforms. 

Chris Hudson, Retail Advised Managing Director at Standard Life, commented: “The retirement advice market has been a huge growth area in recent years, and rightly so, as the challenges facing clients around how best to access and manage their pension savings in their journey to and through retirement, to ensure they don’t outlive them, are significant. Moving from a regular salary to managing a pot of money that needs to last the rest of your life, however long that might be, is a daunting prospect and advice is crucial.


“These findings chime with the tone of the FCA’s review. Advisers see areas where processes can be improved and outcomes strengthened.

“The advice market has changed dramatically in the last ten years both as a result of the pension freedoms but also in response to improvements in technology and regulatory reform. We don’t expect any let up in the pace of change and there’s plenty of scope for innovation in retirement income solutions. We know that 9 in 10 people are looking for income security in retirement, but also want to hold on to an element of financial freedom and be able access their pension savings flexibly.

“The FCA echoed this in the Retirement Income Review when they talked about the need to identify client’s minimum income needs and essential expenditure. The good news is that we are starting to move towards a “best of both” strategy to combine the certainty and security offered through an annuity, with the flexibility and growth potential of remaining invested in drawdown. Other retirement income solutions such as smoothed managed funds can also help reduce the uncertainty of investing by providing some shelter from the daily ups and downs of the stock market. Advisers will be looking to address most client’s twin goals of income certainty and flexibility in retirement and advancements in retirement income solutions, and how they are used in combination, is key.”


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