Retirees withdrawing their money from investment platforms are being hampered by inflexible provider processes and a market-wide lack of innovation, according to the latest report on retirement income by The Lang Cat for Zurich.
Four years on from the pension freedoms, an analysis of 16 of the UK's leading adviser platforms suggests many continue to lag behind when it comes to helping people access and manage income in retirement.
The way consumers interact with platforms has shifted dramatically since the 2015 reforms, with many advised clients now taking income from across ISAs, pensions, and other investments.
But in its third analysis of retirement income functionality, The Lang Cat report for Zurich reveals providers are making slow progress in adapting to the new needs of consumers.
The report, titled A game of life and retirement income functionality, found a number of key insights...
Just eight of 16 platforms (2017: six of 14) allow clients to make withdrawals on almost any day of the month they choose.
This means consumers are restricted to taking income on days that suit their platform, not them.
Just three of 16 platforms offer pre-funding on income withdrawals.
Consumers will get their money back slower from platforms that don't offer pre-funding on lump sum withdrawals, which could mean a wait of more than a week compared to those that do.
Pre-funding also creates certainty and removes the administration drag for advisers having to check if all the money has arrived to send on to clients.
Only four of 16 platforms offer consolidated income payments from across all tax wrappers.
In the new retirement world, clients are taking income from a variety of tax wrappers, such as their ISA or drawdown account.
Without a means to deliver a single, combined payment, clients could have multiple sums landing in their bank account on different dates, making it harder to keep track of their day-to-day finances.
'Computer says no'
Alistair Wilson, Zurich's head of retail platform strategy, said: "The platform market has made some progress in helping advisers and customers manage money in retirement, but vast differences remain in capability between providers. In many instances, it's still a case of 'computer says no'.
"A lack of a market-wide understanding of how to handle cash - including infrequent or inflexible payment options - is restricting choice and convenience for consumers.
"But with customer expectations on the up, the days of providers expecting people to fit in with their processes are numbered. With many investors on track to spend more years on a platform in retirement than accumulation, providers must get quicker and slicker at giving people their money back."
Wilson added: "Some people believe that platforms are homogenous with little to separate them.
"But if you get into the nitty gritty of how to run client propositions via platforms, then the devil is in the detail.
"In the new retirement landscape, we shouldn't underestimate the importance of cash management. Platforms are income-generating machines and giving people their own money in an efficient and manageable way should be a priority."
'Huge deal for the platform sector'
Steve Nelson, consulting director at The Lang Cat, said: "Throwing all we know about customer demographics, platform data and adviser views into the mix, it's clear to us that managing income withdrawal strategies is going to be a huge deal for the platform sector for the foreseeable future.
"Yet our research continues to show us that there are huge variations across the market in how platforms facilitate customer income, whether that be pre-funding, cash management or income flexibility.
"If managing income is a core segment of an adviser business, and we reckon it will be for the majority of adviser firms as we work our way through this generation, then getting on top of this at your research and due diligence phase is key.
"Understanding the functionality and services you need to fulfil your customer proposition, and then asking the right questions of your platform shortlist is absolutely vital."
Read the full report
Read A game of life and retirement income functionality