Oxford Risk launches retirement income suitability software

Behavioural finance firm Oxford Risk has launched new retirement income suitability software to help Financial Planners and advisers meet the FCA's stricter requirements in the wake of last year’s thematic review. The firm said many firms are struggling, particularly in areas like information collection, suitability assessments, and disclosures. It said the growing popularity of guaranteed income products are an example of how retirement income planning is changing and consequently how advisers must adapt. Annuity sales rose 39% to 82,000 individual contracts sold in 2023/24, the highest since before pension freedom reforms in 2015. The £6bn invested in annuities was more than 49% higher than the previous year. Greg B Davies, head of behavioural finance at Oxford Risk, said: “A common strategy for advised clients entering retirement is to allocate part of their pension pot to provide a guaranteed income for life, while keeping the remaining portion invested to allow flexible withdrawals. The approach not only reduces sequencing risk but can also enhance the investor’s capacity for risk-taking with their remaining investible assets. However, financial advisers face a significant challenge, he said: how to demonstrate and evidence that their recommendations on these two components – guaranteed income and the remaining portfolio – are both suitable independently and optimally aligned together. He said the firm’s new retirement income suitability software tool provides methodology for addressing key questions, such as how much guaranteed income should be purchased, or what level of risk should be taken with the remaining pot of invested assets. Retirement specialist Just Group will feed live data into the new tool, providing up-to-date intelligence on health, mortality and product pricing. Oxford Risk said that should allow advisers to get accurate insight on the level of secure lifetime income (SLI) to provide for their clients, taking into account the client’s personal circumstances. Stuart Slegg, head of retail investment solutions at Just Group said: “The challenges faced by clients in-retirement are different to those accumulating wealth, so it’s important advisers can evidence how the solution they recommend meets their clients’ individual objectives.” Oxford Risk was founded in 2002 by science academics from Oxford University. It works mainly with UK Financial Planners. In November 2023, Oxford Risk published a white paper that argued Financial Planners and advisers needed to improve their approach to retirement income suitability. In the white paper, the behavioural finance specialists argued that retirees’ financial personalities are typically ignored by Financial Planners but can have a substantive impact on assessments of risk capacity.

Oxford Risk launches retirement income suitability software

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