Two years after pension freedoms were implemented platforms have yet to adapt their income functionality to meet investor needs, a new report has claimed.
Since the introduction of the pension freedom reforms in April 2015, consumers have increasingly turned towards income drawdown products, making retirement income functionality on platforms more important.
However a new report claimed many of the popular platforms in the market have still not adapted sufficiently to give consumers the access to their funds they need.
In the 2017 Spring Budget, the government reported the take up of pension freedoms had far exceeded expectations. The Treasury raised £1.5bn in pension tax due to withdrawals, nearly five times more than the anticipated £0.3bn.
With this in mind, for a second year running the lang cat compared 14 adviser platforms, which collectively account for 90% of assets under administration in the market.
Commissioned by Zurich, the 2016/17 report compared platforms on basic proposition elements, modelling tools, the management of central investment propositions, available asset types, cash handling and income payment management.
The lang cat found many platforms were still not fully geared up to deliver regular, flexible income solutions to consumers in retirement.
Just six of the 14 platforms reviewed allowed clients to withdraw regular income on almost any day of the month, with others seemingly working more to the convenience of the platform than the consumer, the lang cat said. However 13 of the 14 now allow lump sum withdrawals on any day.
As consumers make use of different wrappers to provide retirement income, this means they receive more individual payments on different days making it more difficult to keep track of their finances. Despite this, only two of the platforms reviewed offered consolidated income payments, the lang cat found.
Principal Mark Polson said: "If there's one thing that could genuinely transform how clients feel about financial services, it's providing an excellent experience in retirement.
"Sadly, in all too many cases, platforms expect clients to fit in with their processes rather than putting the client first. Our research shows clients are still at the mercy of different systems, different reporting, different payment frequencies and more.
He added: "As taking income from across ISAs, pensions and other investments becomes the norm, this is a bit dispiriting, and is something we'd like to see platforms concentrate on in 2017."
With the Bank of England cutting interest rates to 0.25% in August 2016, more platforms may be poised to implement full platform charges on cash holdings, as opposed to claiming a share of the interest generated, the lang cat said.
AJ Bell had overhauled its approach by introducing a charge on cash holdings last August and more platforms might follow that approach, it said. However, this could leave investors short, it pointed out.
Margins are tight and cash rates have continued to wane, another reason why efficient management of income and fee payments to keep cash holdings to a minimum was vital, the lang cat said.
Novia was the only platform to cover all bases when it came to modelling tools. These tools help advisers with risk profiling, cashflow modelling and tax wrapper optimisation, allowing them to create, and help implement, the best income plan based on wealth and goals.
Whole-of-market platform Novia also showed the biggest improvement in the range of assets available on the platform but others, such as frontrunners Ascentric, Standard Life and Transact, also performed well.
The report also noted that a handful of platforms had added more tools focused on managing clients' retirement journey, citing Aegon's interactive retirement income planner and Standard Life's tailored drawdown as examples.
Pre-funding is needed for platforms to be able to pay out income to drawdown clients straight away or move money quickly when necessary. A range of platforms were found to have added to their pre-funding functionality in the past year, some catering even for ‘Bed & Pension' and ‘DFM model portfolio' scenarios - two categories newly added to the report.
Standard Life and Zurich continued to lead the market in offering a full suite of pre-funding options, closely followed by Ascentric, Elevate and Old Mutual Wealth (OMW).
According to the report, all platforms provided similar results on managing centralised investment propositions as they did last year, though the lang cat found this to be ‘unsurprising' given last year's model portfolio functionality was already sufficient.
It reiterated being able to run multiple portfolios within a single wrapper for clients with more than one retirement goal, was still an area in need of improvement though.
Zurich head of retail platform strategy Alistair Wilson said: "Consumers will now typically spend more time on a platform drawing income, than growing their wealth. Platforms have got to become more sophisticated at helping advisers and clients set up and manage income withdrawals.
"At the moment, there's still too much focus on accumulation over income. The platform market as a whole needs to get quicker and slicker at giving consumers their money back."
The chairman isn’t answering his email
Reforms not enough
An economic cocktail
To encourage consumers to shop around
Will report to Pat Shea