Hybrid advice propositions reducing the risk of retirement poverty

12 December 2024

New Defaqto research reveals trends in the blend of robo-advice and human interaction, and the leading propositions which advice firms can white label

With an ageing population and rising costs of living, more people are at risk of retirement poverty due to a lack of pension and savings advice.

According to FCA figures, 69% of more than 885,000 pension pots accessed for the first time in 2023/24 were accessed without advice. Most also took an unsustainable rate of withdrawal with the vast majority opting for 8% per annum or more.

Innovative hybrid solutions are aiming to help counteract this and now the pioneers of this market in the last 12 months have been revealed by Defaqto.

Using its independent and impartial methodology to research current propositions for the retirement advice market, four products have been identified as Trailblazers, leading the way in blending pension advice in 2025.

Richard Hulbert, pensions expert at Defaqto, said: “We have seen the birth of hybrid propositions which aim to seamlessly amalgamate technology and robo-advice with human interaction and regulation. It’s an offering that as consumers we have become accustomed to in many areas of life.

“We’ve looked at those who are leading the trend specifically in standalone propositions that advice firms can white label. This can give advisers a much-needed new revenue stream by accessing clients currently outside of their target markets. Most importantly however, it's opening up retirement finance advice to a wider market which is crucial to reducing the number of people risking a poor standard of living once they’re retired.”

Defaqto have recognised Trailblazers who are bridging the retirement advice gap:

Pension Potential from Punter Southall
Destination Retirement from Hub Financial Solutions, part of Just.
Smart Retire from Smart Pension
My Time

Steve Butler, Managing Director at Pension Potential, said: "The pensions freedoms created a complex and underserved marketplace over the last 10 years, in which people can seriously impact their retirement income with one bad decision.

“Digital advice is essential in addressing the at-retirement advice gap for the majority, but a high proportion of people still want support from real people. At Pension Potential, we have brought together the latest technology, UX design, and behavioural techniques with friendly retirement experts in a hybrid service so that customers feel supported and empowered as they navigate these difficult decisions.

“As an early innovator in this space, it is fantastic to be recognised by industry experts who understand the challenges of at-retirement advice and have our innovation highlighted through the Defaqto Trailblazer award.

“Solving the challenges in the at-retirement space will require further innovation from regulators, pension providers and businesses like Pension Potential. This way, customers can easily identify, and consolidate their multiple pension pots and then implement their retirement income simply but with the risk appropriately managed."

Advisers remain of the utmost importance

The topic of robo-advice and the role of AI has raised concerns amongst both advisers and consumers, however all the Defaqto Trailblazers and many other hybrid propositions require regulated financial advisers to populate them.

Richard added: “The automated element often can’t go beyond the education and guidance stage. Advisers’ clients will quickly find themselves at the point of needing tailored, regulated advice and will value the empathy and understanding that can only be given via a face-to-face, personal interaction.

“The most comprehensive hybrid propositions broadly follow the same steps. Education is very robo-led as is the initial process of uploading information or documents to portals. Automated advice can also often be relied on for annuity purchases to cover essential spending. Centralised Retirement Propositions then need to be very considered and regulated advice is needed to ensure suitability. This is where clients will want to feel very protected and know a person has given great consideration to their needs.”