Scottish Widows has launched a Retirement Matrix tool, after its research found a disconnect between what people want from their retirement income and what products they are actually choosing.

The tool is designed to enable advisers to have better conversations with customers to help them boost their retirement income, allowing all current and potential retirement products to be mapped against what people want from their retirement income on a 3D cube.

The Retirement Matrix was included in the new Scottish Widows report, Decumulation: Understanding the Needs of the Nation, which looked at the views of retirees and near-retirees on accessing their pension savings.

This revealed a disconnect between what people want from their retirement income and what products they are actually choosing, suggesting that innovation is needed to develop retirement income propositions and additional support for customers will be required.

In particular, the survey found that while 80 per cent of people wanted a product that provided a guaranteed income for life, a minority of customers are purchasing an annuity product that offers this.

In addition to this, more than half (55 per cent) said a predictable income was important to them for budgeting, yet most people selected an income dependent on investment returns product.

In the report, Scottish Widows identified three factors that influence people’s retirement choices: control (income for life vs flexibility to decide what they spend and when), consistency (consistent or variable monthly income), and legacy (passing on the pension pot in case of death).

In particular, the report found that more than two in five (43 per cent) said control was their primary decision point, while 33 per cent of people said legacy and 24 per cent said consistency.

The report also explored how people would like to receive financial support at retirement, particularly given the Financial Conduct Authority recently floated the idea of using ‘choice architecture’ more widely in customer conversations.

Scottish Widows found that this idea was popular, with 38 per cent of respondents expressing a preference for a service where the pension provider offers them a specific outcome after taking them through a series of questions.

However, other options were less popular, as 17 per cent said they wanted guidance, 14 per cent said they wanted full advice, 14 per cent said they wanted simplified advice, and 18 per cent of respondents said they wanted none of these.

Those with a preference for full advice were respondents with the largest pots over £300k, but attitudes towards the five proposals largely remained consistent across pot sizes.

In addition to this, people with more than one pension pot wanted support that related to all their pots, with 81 per cent of people with three or more pots wanted support that considered all their pots.

Scottish Widows also shared a number of recommendations to help address the "decumulation dilemma", with head of policy, Pete Glancy, arguing that "the model determining how retirees will access their funds in retirement could use a similar shot in the arm".

Glancy noted that the options at retirement can be “daunting and complex” and people who cannot afford the services of a financial adviser may “inadvertently” make choices that do not meet their and their family’s needs.

“At the same time, policymakers are still working through regulatory and legislative changes which will determine what is and isn’t possible in the future,” he said.

“People are telling us loud and clear what they want, but not everything they want is currently available, or indeed permitted.”

Glancy argued that continued collaboration between the pensions industry and policymakers is required to determine what is needed and then deliver it.

“This research is another illustration of why an independent Long-Term Savings Commission, that considers UK financial resilience in the round, is necessary to deliver the future we want for Britain in retirement,” he stated.

Adding to this, Scottish Widows managing director for retirement, Emma Watkins, said: "Our research has placed the customer and their needs front and centre of this debate, and it clearly shows that customers need better support when it comes to making these important retirement decisions.

“This research and the Retirement Matrix model can help pension schemes and providers to design products that meet customer needs, within the bounds of what is permissible today, and help inform the policy debate on what could be permissible tomorrow.”

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