U.K. participants have fewer choices when it comes to retirement strategies due to recent government reforms and rapid market changes, says a new study.
"The Meaning of Life 2: The U.K. life company business model in the context of dramatic changes to the political landscape and the investment and private-sector pensions market," published Monday, updates findings of a Pensions Institute independent investigation into the U.K.'s life company business model in 2015.
The study concluded that a combination of consolidation and divergence in the U.K. life and retirement market "is having a major impact upon the future health of the retirement income market with consumers set to suffer as a result."
Despite so-called pensions freedoms introduced in April 2015, which effectively removed the requirement in the U.K. to purchase an annuity to provide income in retirement, there is little choice for participants, said the report. Consolidation among multiemployer plans, known as master trusts, was highlighted by the study, as well as "considerable consolidation" among life companies that have overseas parent firms. It is set to continue over the next two years, said the study. The 2015 report forecast that 90% of auto-enrollment savings would be run by a select group of financial firms by 2020.
Regulatory changes have also made decisions more complex for participants.
The study also found that almost half of the U.K. working population is not covered by automatic enrollment, "and there is a danger the project could lose momentum if the contribution hikes due in 2018 encourage higher opt-out rates."