Nervous retirees are seeking financial advice on the flexibility offered by pension freedoms to prevent running out of retirement income.

Three-quarters of advisers also said that common challenges their clients’ face includes: how to create retirement income, while 64% said it was understanding all the options available for them to invest their money.

A massive 38% of the 250 advisers quizzed by Aegon said that running out of money was their clients’ greatest concern.

Nick Dixon, investment director at Aegon, said the data highlights the complex and evolving retirement landscape.

He added: “The world of work is changing fast and retirement is increasingly a journey of change rather than an event. Since the introduction of pension freedoms, we’ve also seen a behavioural shift in the way retirees are choosing to take income in retirement.

“The freedoms have enabled individuals to adopt a more flexible transition into retirement, with people accessing pension savings to support a reduced working pattern. Our research shows that, with the flexibility, advisers are finding that clients are relying on them to guide them in the decisions they make, as many retirees fear running out of money. It is crucial, that those at or approaching retirement seek financial advice to help build confidence and manage their money.”

Interestingly, the research found that cautious retirees favour risk reduction over generating high returns with 53% saying this is the case, with a third of clients’ assets invested in multi-asset strategies.

Since the introduction of pension freedoms, advised clients are also preferring to enter drawdown rather than take an annuity or use cash. In fact, 60% of advisers said their retiring clients hold three quarters or more of their assets in income drawdown.

Commenting on the findings, Alex Reynolds, IFA from Advies Private Clients, said: “When I speak to clients about retirement, it is the fear of running out of money which is their number one concern and rightly so. As defined benefit pensions have closed over the past 10 to 15 years it has been a challenge for all advisers to help clients find a sustainable way to do this through one or more different options. Previously, clients had certainty but now many worry about how much income they will need and how they will be able to provide this.

“This may include buying an annuity, using rental income from a new or existing property, releasing equity from their property, natural income from investments or pensions and of course flexible drawdown from pensions.

“The challenge for advisers is how to explain and show the risks of each option with the ability to project forwards and there are now a few different ways to do this which have a “scientific” basis, rather than the deterministic output that many have previously used which can be dangerous for clients in decumulation.

“This is an area where there will be plenty more innovation as more and more clients look to plan their retirement, and it is down to adviser to show they can provide value in this area. The recent FCA report stated how many clients had taken no advice in drawdown which is quite scary given the complexities that exist, and it may only be when we see and hear clients running out of money that more will understand the importance of advice at this crucial stage of their lives.”

Aamina Zafar is one of the UK’s leading financial journalists. She has previously worked as a senior reporter at FT’s Financial Adviser. The award-winning journalist writes regularly on the IFA community, mortgages, pensions and financial regulation.

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