The ongoing cost-of-living crisis is putting seven years of pension freedoms progress at risk, a paper from independent actuaries AKG has warned.

The paper, published in partnership with Abrdn and Scottish Widows, highlighted that the return of high inflation and cost-of-living concerns were challenging thinking for both consumers and advisers.

AKG noted that the hard work had “only just begun” for the industry, although advisers questioned for the report said they were starting to see an evolution in consumer attitudes to preparing and saving for retirement.

The research found that running out of money was a concern for 42 per cent of consumers, while 40 per cent were worried about the impact of inflation/cost of living and 31 per cent were concerned about care costs in older age.

For advisers, the top two concerns they have for their clients were investment volatility (67 per cent) and the impact of rising long-term inflation (59 per cent).

“Concerns around inflation and cost of living crisis are a very real threat and issue for people across the country and will have a direct impact on the considerations of pensions customers across age groups and whether in accumulation or decumulation pension phases,” said AKG communications director, Matt Ward.

“We have had such a prolonged period of low inflation that a lack of inflation may be almost baked into people’s assumptions and their positions/plans could be heavily destabilised.

“The industry therefore needs to be both helpful, practical and realistic in the way in which it seeks to educate and address these issues with a wide range of pensions customers.”

The paper also detailed findings about who consumers trust to give them guidance or advice on retirement options.

Less than a third (31 per cent) would trust financial advisers/planners, 23 per cent would trust the Citizens Advice Bureau, 23 per cent would trust the government/Money and Pensions Service, a fifth (20 per cent) would trust Pension Wise/MoneyHelper, and 18 per cent would trust their existing pension provider.

Customers wanted to see honesty (45 per cent), value for money (38 percent), clear communications (34 per cent) and transparency (34 per cent) as the top traits/qualities from their pension provider.

Almost a third (30 per cent) wanted to see advice/guidance as a trait/quality from their pension provider.

“Whether the cost-of-living crisis is short or long lived, it is a reminder about the importance of financial planning,” commented Abrdn head of industry change, Alastair Black.

“For clients pre-retirement the current economic conditions may have a long-term impact on their plans if they cannot afford to save as much.”

Scottish Widows head of retirement solutions, Jacques Bezuidenhout, added: “It is positive to see consumers saving more for retirement and becoming more engaged with their pension.

“However, concerns remain around the number of customers not seeking advice particularly as defined contribution pension pots become more prevalent.”

When advisers were asked to detail the key requirements for providers to be successful with them, 79 per cent cited value for money, 65 per cent mentioned service delivery standards, 57 per cent cited digital/online capability and functionality, 55 per cent said range of product/fund solutions, and 51 per cent mentioned financial strength/sustainability.

Ward concluded: “From an adviser perspective inflation and investment volatility represent key retirement planning concerns for clients and hence clients will need to be warned about potential impacts.

“Whilst economic backdrop and markets had been relatively benign since the pension freedoms changes came into force, income drawdown investment portfolios are now facing a series of challenges and will need to withstand a period of turbulence. Pension assets, and others where support required, will have to sweat for longer.”

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