According to the annual 'Managing Lifetime Wealth: retirement planning in the UK' report from Aegon and NextWealth, back in 2018, 56 per cent of advisers were offering DB transfer advice and the consensus from advisers was that client demand for this service would keep growing.
However, the latest research shows that less than a quarter still do DB advice and only 14 per cent expect to remain in this market at their current level.
Steven Cameron, pensions director at Aegon, said the single biggest change in the past five years has been the "major reduction" in availability of DB transfer advice, prompted by the increased business risk of undertaking this advice, as well as the changes that the Financial Conduct Authority has introduced over recent years.
“With interest rates still rising, schemes are offering lower transfer values than a year ago, which is likely to mean a lower supply will be matched by lower demand,” he said.
“But it’s hard to predict what the position will be five years from now.”
The research, which was conducted in November and December 2022 with 221 financial advisers and 209 consumers of retirement advice, found that another major change was the way most advisers set withdrawal rates for clients in drawdown.
Five years ago, two thirds (66 per cent) of advisers used a fixed rate or range to determine a safe withdrawal rate, with most opting for the 4 per cent rule.
The 2023 report showed that only 29 per cent use a fixed rate or range now. Instead, more advisers are now opting to use cash flow modelling or scenario modelling (52 per cent).
Cameron said: “Coming a close second, is the approach to determining safe drawdown withdrawal rates.
“The top objective in 2023 for clients is to use savings to provide a sustainable lifetime income while preserving all or part of the capital.
“The increased use of cash flow or scenario modelling to identify a safe withdrawal rate means that advisers have been able to add further value to clients working towards this objective – advisers can better assess whether against an uncertain future investment world, clients should be able to meet their income requirements without running out of money with this approach.”
What has changed less than expected
On the other hand, he explained, the adoption of a centralised retirement proposition has failed to grow as quickly as had been predicted.
