Investing in the age of AI

Matt Ward, Communications Director at AKG, showcases the Executive Summary from their latest industry research paper - ‘Ten Years of Freedoms – Lessons, Gaps, and the Road Ahead."

AKG has previously published pension freedoms themed research papers in 2015, 2018 and 2022, and so naturally in the approach to the tenth anniversary of pension freedoms it was the perfect time to revisit this theme. Our latest paper, ‘Ten Years of Freedoms – Lessons, Gaps, and the Road Ahead’, sponsored by Fidelity and Standard Life, was published on 12 June 2025 and can be downloaded at Downloads | AKG.

Whilst there is obviously an element of reflection involved, we wanted the paper to appraise the ‘here and now’ of the pensions/retirement market and to look ahead at what needs to come next in these pivotal few years. Crucially, the paper is informed by fresh insight from market research exercises carried out with consumers and advisers.

In highlighting and discussing many of the key issues of the day we want this paper to create a platform for ongoing dialogue and debate in the industry, for AKG, the sponsors and for other key industry stakeholders.

The following content is extracted directly from the Executive Summary.

Flexibility comes with consequences – Generally pension freedoms changes are viewed as positive, given the flexibility now available in how consumers can access pension savings, but with this flexibility comes responsibility for choices made and associated consequences. This can be challenging even with the support of professional financial advice, but even harder without.

Pension purpose restored – Much has been talked about since pension freedoms were introduced around the core purpose of and intended outcome for pension saving, but for the majority it feels like this requirement has returned to the provision of a retirement income to replace salary and support living in retirement.

Re-establishing pensions as the primary source of retirement income – Similarly, much has been discussed around the optimal order in which a client with multiple savings pots (pension and otherwise) might access these assets in retirement, but given recent legislative changes it is felt that pensions will typically return to being the first pot accessed from a planning perspective.

Education, education, education – There remains an obvious requirement for better access to educational resources on pensions/retirement matters and this applies across age groups. As can be seen from the consumer research, awareness of changes to legislation, of pension access rules and of product terminology is generally low and can be improved.

Prevailing conditions creating perfect storm for planning – Rising cost of living/inflation, running out of money, paying for care in older age, political instability/future pension rule changes and paying more tax than necessary were all selected as concerns by consumers and serve to illustrate challenges around retirement planning and decision making against the current backdrop. Together this presents an opportunity for advice firms and emphasises the importance of high quality information and tailored guidance.

Uncertainty felt by advisers – Advisers also acknowledge the challenge of planning with clients for the long term against an uncertain legislative/ regulatory backdrop in the short term.

Advice / support gap exacerbated – Clearly pension freedoms have been good news for advice firms who are able to work with paying clients to identify suitable retirement planning strategies, but the new flexibilities have also served to exacerbate the challenges faced by those without such relationships in place. The well documented advice/guidance gap for pensions has been heavily underscored and the non-advised need more options for decision making support.

‘Sprinting’ to the rescue? – FCA has wanted the industry to innovate, and the industry has wanted clearer advice/guidance boundaries from FCA. This has created a progress blockage for a while now but there is optimism about a breakthrough. Recent updates from the FCA on the boundaries and targeted support have been well received, with some sprint work amongst potential solution providers underway. Still plenty of work to come, but huge opportunity in the industry amid excitement that 2025/26 could be a seismic period for guidance solutions.

Tech and AI; a little less conversation – Throughout the paper it is clear to see that technology and AI will have a critical role to play in the future success of the pensions/retirement market. But, amongst all the talk, the industry needs to see more practical and tangible progress made in terms of where tech and AI can create improvements and efficiencies, as well as where it might support development of engagement and guidance.

Advice firm comfort in retirement processes and ‘bucketed’ approach - Apart from the need for more decumulation focused investment services, advice firms via the interviews see less need for huge product development believing that advice itself is the key product. The ‘three bucket’ approach so effectively enabled by cash flow planning and modelling tools dividing client assets and pension income to cover essential household spending, discretionary objectives and aspirational spending is seen as the main route forward.

Spouse and family engagement vital for intergen planning – More firms are heard to be moving towards or considering a family unit client definition rather than individual. There are several reasons for this. The most obvious is the intergenerational aspect of long term financial planning. More immediately – and this subject cropped up repeatedly in this research exercise – there is a growing awareness of the need to engage female family members more comprehensively in financial planning and decision making.

Annuity and drawdown co-existence – It has been relatively slow to do so, but the product market is evolving. Whilst drawdown has largely been viewed as the product ‘winner’ post-freedoms, the annuity revival is obvious through rate competitiveness and industry sales stats. And with the main purpose of a pension restored, the draw of guaranteed retirement income supply will be there for many. The adviser survey points towards room for a range of product types in the market. The next step and challenge for the market is around how the two core product types can co-exist and potentially be blended where circumstances require.

‘Combi-products’ – turning theory into reality – Positivity around the theory of ‘combi-products’ which balance investment exposure with provision of secure income is seen in the adviser survey, but from the interviews there is some reticence around what type of client profile/segment these are suitable for and potential concern about how they fit into the advice processes already used in advice firms. It is suggested that tools which can model scenarios with usage of such solutions would be a useful addition moving forward.

Competitive market positive for range of providers – The UK pensions and retirement market continues to offer intriguing growth opportunities for a diverse range of provider types, including Insurance Companies, Master Trust providers and platform operators, but they will need to deliver when it comes to meeting advice firm requirements and deliver compelling service.

Workplace opportunities huge – As auto enrolment pots grow and member profiles mature, the role of workplace pensions will come into huge focus at the approach to accessing savings and entering retirement. Hence the workplace scene is viewed as an area of huge opportunity for a range of market players, around both the provision of advice and guidance solutions, as well as mainstream retirement income solutions.

Pensions dashboards progress a necessity – Advice firms interviewed are positive about the future role that can be played in the market by dashboards, but express frustration with perceived lack of development/delivery progress. This cannot become the industry’s ‘HS2’.

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