The Investment Association (IA) has launched its Investing for a Better Retirement paper, outlining a series of principles and four key recommendations to improve access to high-quality, sustainable retirement income solutions for UK savers.
As the UK’s pension system continues to evolve, the IA calls for greater saver engagement with their retirement choices and a stronger focus on retirement outcomes. To support positive outcomes for pensioners, the IA has set out principles for effective retirement income delivery, under which solutions should be flexible, inflation protected, tax efficient, future-proof, and value-for-money.
Retirees today face a challenging environment, shaped by inflationary pressures, changing individual needs, and exciting, but complex, decisions over how to use their accumulated pension wealth to provide an income. With so many options, it is vital that people get support for the decisions they make in retirement. While there is evidence to suggest that the prevalence of people seeking financial advice as they access their defined contribution (DC) pension may increase, we estimate that there may still be as many as 10 million people in the current DC population that do not seek advice before accessing their pensions.[1]
Currently, savers turn to a wide range of sources for retirement information, yet nearly 30% of non-advised customers do not actively seek any information at all,[2] underscoring the need for a mechanism to support these people. To help investors, both advised and non-advised, maximise the benefits of the pension freedoms, the IA proposes four key recommendations:
Deliver an enhanced support framework for non-advised DC investors
- Develop “Targeted Support” to guide savers to good outcomes. For those accumulating DC wealth and not seeking regulated financial advice, Targeted Support will be critical in guiding them to good retirement decisions and outcomes.
- Provide a backstop retirement income solution for those opting out of Targeted Support.
Support advisers to further improve outcomes for client from retirement income advice
- Encourage advisers to consider a client’s Attitude to Risk and Capacity for Loss in retirement, focusing on income stability and inflation protection, the key objectives for delivering retirement income.
- Develop risk metrics for retirement investment products that are better aligned with retirement income objectives.
Ensure Value for Money (VfM) in retirement
- Ensure the retirement income market has a value-focused mindset embedded in the marketplace.
- If the forthcoming DC VfM framework is applied to retirement income in future, it should be adapted to reflect income-focused performance and value metrics.
Reform the UK authorised fund rules to better enable investment managers to deliver retirement-income oriented products
- Allow UK authorised investment funds the ability to both distribute capital to supplement income and retain income across accounting periods to allow them to deliver a smoother income to investors
- Ensure retail distribution rules support the delivery of retirement income focused investment strategies, permitting the use of a broad investment toolkit.
- Investment managers should facilitate the role of private assets in portfolios to and through retirement.
Imran Razvi, Senior Policy Adviser at the Investment Association, said:
“Ten years after their introduction, the pension freedoms continue to offer DC pension savers the ability to tailor the use of their pension wealth to their retirement goals. However, the same freedom means these individuals face a complex series of choices over how to generate income., As more people retire increasingly reliant on DC wealth, the need for informed, long-term planning and support has never been greater. Ensuring people – whether advised or non-advised – have access to appropriate support and flexible, value-for-money retirement income solutions, is paramount.”
“Our recommendations underscore that retirement isn’t a one-size-fits-all journey – and today’s savers need the tools, support, and investment options to match that reality. The financial services industry must work collectively to build stronger engagement with retirement planning, deliver more consistent support, and implement smarter regulation to empower the industry to deliver better outcomes for UK savers.”
Richard Parkin, Chair of the Investment Association’s Retirement Income Committee said:
“We are moving rapidly towards the point where the income generated from savings will be the mainstay for people’s income in retirement. This increases the importance of consumers being able to access retirement options that generate durable, stable and growing income. Invested solutions have a key role to play in this, offering the opportunity to improve retirement outcomes while retaining flexibility in the face of changing client needs. To support this, we need to reframe how we think about risk in retirement away from volatility of capital towards the variability of income. The two concepts are related but very different.
“Alongside this, in order to allow investment funds to distribute income more effectively and efficiently, changes will need to be made to regulation and tax laws. In particular, the restriction on distributing capital to supplement income and the requirement to distribute all income earned make it difficult for funds to deliver the stable and growing income consumers will need.
[1] IA estimate based on Financial Lives Survey 2024, FCA, 2025
2 Better retirement outcomes in the DC era, Invesco, 2024