One of the key challenges in retirement planning is balancing the need for a secure income with flexible access to savings. This was one of the key takeaways from a recent Corporate Adviser round table, which concluded that striking the right balance between the two retirement strategies requires combining both annuity and drawdown options, which take into account individual pot sizes.
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The discussion also touched on the importance of providing clear guidance through targeted support, improving communication, and ensuring collaboration among employers, providers and trustees to build effective solutions that align to retirees’ needs. Delegates also discussed the need for clearer FCA regulation and better pension communication, noting that while digital tools will grow, complex cases will still require human advice.
Security vs flexibility
The challenge of balancing security and flexibility in retirement planning was a key focus of the discussion. Standard Life senior investment manager Garry Latimer stressed that it’s unrealistic to expect both in all cases. Retirees must evaluate their individual circumstances, as relying solely on a small pension or savings is not a viable long-term solution for meeting basic needs. While digital tools may help in the future, he cautioned that incorporating too many external factors which could makes the process overly complex.
Latimer said: “It’s about provoking them to think and teasing out what the real dynamic is because, bluntly, you can’t have both. You need to find where you are on that spectrum. “When you start to include debt, mortgage, critical illness, it just becomes so complicated…you’re just going to confuse people.”
Building on this, the question was raised of whether there should be a threshold for accessing structured retirement solutions or if even a small guaranteed income, such as £1,000 a year at age 85, could still be valuable, particularly if index-linked.
Barnett Waddingham senior client relationship manager Jeni Flanagan said there shouldn’t be a strict threshold, as retirement needs are highly individual. She suggested that a more sophisticated framework should consider factors like household needs, partner circumstances and health changes.
Delegates agreed that the best retirement strategies will balance secure income and flexible access, tailored to pot size. Smaller pots may rely more on the state pension to cover everyday expenses, plus drawdown; while those with larger pensions may benefit from a mix of annuities and drawdown. With no universal solution, retirees must consider factors like household needs, health, and partner income.
As part of the discussion on structured solutions, delegates also considered deferred annuities, a product that offers guaranteed income later in life but remains underused. High costs, early commitment, and lack of flexibility often make them unattractive. Changing circumstances, such as inheritance, health shifts, or premature death, can leave retirees locked into a plan that no longer suits their needs.
Some experts see potential in deferred annuities if restructured, but many at the event said expense and complexity remain barriers to widespread adoption. Instead, delegates advocated for a more blended approach, combining guaranteed income with flexible drawdown for a more practical balance.
Support not advice
Grove Trustee Services director Gurmukh Hayre discussed the different approaches to supporting members, noting that digital solutions could serve as a precursor to targeted support. He highlighted the potential to move towards simplified or holistic advice, especially if other assets like Isas are incorporated. However, he did add that this could shift the focus away from pensions and complicate the process.
Hayre emphasised that the targeted support consultation document focuses specifically on helping people make informed decisions at the point of crystallising benefits and should remain the primary objective. He said that if tools like the Standard Life one stay true to this focus, it could work as a solid starting point, though it would require further development to ensure it aligns with targeted support.
One potential danger highlighted by Hayre, is that many DC savers are moving pensions from low-cost workplace schemes to expensive retail products, often tripling their costs — although many appear unaware of this. He said this highlights a growing need for clearer guidance and better education. Retirees must understand the value of their existing schemes before making costly decisions.
He said: “I hate to see that sort of detriment taking place. The question is always: do you really realise what you’re giving up before going down this route?”
Flanagan added: “Some responsible employers and trustee boards are ahead of the curve, but many still aren’t. The real issue is that all the good done during accumulation risks being undone at retirement. The industry has a moral responsibility to ensure members are properly informed—otherwise, they’re blindly walking into complex decisions that could leave them worse off.”
LCP investment partner Sam Cobley said trustees need to be more proactive in guiding members to retirement solutions. He explained that clear, direct signposting leads to higher uptake. “We’ve got a number of clients, and we found that the stronger you are in signposting, the more members take it up. If you just say, have you explored X solution? There’s very little take up.”
Regulatory considerations
But the current FCA rules blur the lines between advice and recommendations, causing insurers to be cautious about promoting their own tools and products, according to Sackers partner Jacqui Reid. She said targeted support proposals from the FCA are a necessary step forward, especially since people aren’t willing to pay for regulated financial advice. However, legal hurdles and the sidelining of the adequacy review mean the industry must be bolder in its approach.
She said: “There’s a significant challenge with the current FCA rules that makes it difficult to distinguish advice from recommendations. Insurers are understandably cautious, and we need the FCA to help clear these legal hurdles so that we can support people in targeted ways. We have to accept the regulatory barriers and push for change—otherwise, progress in pensions will remain stalled.”
Hayre agreed that the industry should be bolder, noting that the targeted support paper empowers providers to set their own thresholds, such as choosing to withdraw 3 per cent from flexi-access until age 80, so long as they uphold their Consumer Duty obligations. This could offer useful context for members, he said while stopping short of being a direct recommendation.
According to Reid, trustees of master trusts face a tangled regulatory landscape, balancing DWP legislation, TPP expectations and conflicting rules: while disclosure regulations mandate that all retirement options be explained to members, financial promotions rules restrict how products like Standard Life’s can be promoted—even when they’re available within the trust.
Reid noted that TPR is aware of these inconsistencies and is working to streamline them for trustees. ”We need to ensure that the regulations are consistent so that trusts aren’t caught between two conflicting stances,” he added.
According to Cobley, despite the absence of full regulatory support, providers are still motivated by commercial incentives to improve their solutions. The DWP consultation and King’s Speech have created a “snowballing effect,” pushing providers to offer better solutions. While regulatory guidance is still awaited, this opportunity to manage more assets is driving innovation in this space.
Solutions
Reid said that many large own trust schemes now bolt onto a master trust for retirement, but there is uncertainty over whether the trustee’s duty to offer retirement solutions will remain within the own trust or shift to a different legal wrapper. She suspects the government may push for in-scheme drawdown to support the consolidation agenda, adding: “The challenge will be whether the government requires own trust schemes to offer in-scheme drawdown or if current structures will continue.”
Hayre explains that many own trust clients, initially reluctant to build retirement solutions within their schemes due to extra governance and risk, are now considering creating seamless solutions that offer both annuity purchase and drawdown options. These solutions aim to provide value for members and a better retirement experience with robust governance in place.
He said: “They let people come to retirement and take their pots elsewhere, but now they’re at a point where they think, well, can we build some kind of wraparound solution which is seamless, delivers value for members, gives them a better retirement journey experience, and has a good governance robust structure.”
BOX: New online planning tool
Standard Life has introduced a new online tool to help users estimate the guaranteed income they’ll need in retirement. Available on their website, the tool prompts users to consider essential spending needs and income requirements. It also accounts for situations where users may not receive the full state pension and factors in any defined benefit (DB) pensions they may have.
The tool compares the user’s guaranteed income to the minimum level needed for a ‘reasonable standard of living’, based on research from the Pensions and Lifetime Savings Association. It highlights any income gaps and helps users explore how to supplement their guaranteed income using defined contribution (DC) savings.
The tool also lets users explore higher income levels and shows the cost of purchasing an annuity at that level, while leaving remaining funds for flexible drawdown in the early years of retirement.
Standard Life head of retirement proposition Esther Hawley explains the tool’s main advantage: it ensures essential spending needs are covered by guaranteed income, reducing the risks of market fluctuations. She clarifies that the tool is a starting point, not personalised financial advice. Hawley said: “It’s designed to work for any pot size, though practical challenges arise for smaller amounts, like difficulty in purchasing annuities under £10,000.”
While it’s currently available on Standard Life’s website, Hawley noted that future enhancements will include making it available within the member login. It’s just “one part of the jigsaw” according to Hawley, as the company looks to address the changing needs of the retirement planning industry, particularly with upcoming regulatory changes from the FCA and DWP.
According to Hawley providers have historically offered only basic guidance, leaving users to figure things out on their own. But she said with this new tool, Standard Life is moving beyond that approach and while it’s not ‘personalised advice’, she said it encourages users how to think more about their options and engage with retirement planning, a step the industry really needs to take.
