The future of retirement

Opportunities for product innovation in the retirement income market

The introduction of pension freedoms in 2015, coupled with the growth in defined contribution pensions have, on the face of it, created a compelling market need for product innovation in the UK retirement sector – a need that has only been heightened by the COVID-19 pandemic. However, to date, there has been limited mass market innovation in the retirement products available to consumers. There is no single explanation for this and in our new report we set out to consider the range of complex underlying causes and the interplay between them.

In the light of this analysis, we look at the challenges faced by organisations wishing to create innovative retirement income products for the mass market and how these may be met. We also consider where, as and when these challenges are overcome, innovation may occur to create new products to meet consumer and market needs.

Our research identified a combination of factors that have acted as a brake on innovation in the market to date, and some factors that providers will need to address in order to innovate successfully in the future:

   Barriers to innovation Factors for successful market innovation
The economic environment, in particular low/negative interest rates Combining flexibility and guaranteed income
Consumer behavior and low consumer engagement Simplifying complex choices for consumers
Regulation, both prudential and conduct Deriving income from wealth as a whole, in particular property
Tax complexity Increasing consumer engagement


Our view is that there are clear product areas with potential for rising commercial success in the mass market, including hybrid product structures, a potentially greater role for equity release alongside other products for retirement planning, and other forms of longevity protection. Innovation in these and other areas will be essential for providers to meet the needs of a growing and rapidly changing target market.

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