The retirement income market in the UK is in the midst of some of the most radical changes in living memory, following the Government’s proposed relaxing of the pension withdrawal rules from April 2015. From then, it is expected that retirees will be given greater access to their pension pots, with the ability to withdraw as much or as little as they wish.
Ahead of making these important decisions, it is suggested that consumers should be guided as to what their options are. However it is not a simple decision and there are many variables which will impact the most appropriate solution.
Apart from the more fundamental questions that require answering about guidance, such as when it should be delivered and by whom, it is also necessary to consider how the market is going to change and what new products will emerge that then need to be guided upon.
Adrian Walker, retirement planning manager at Skandia, comments: “The key here is consistency. It will be counter-productive if an individual has five different pension schemes and the guidance received from each scheme is different. This helps to answer the ‘who’ question and in our view this puts paid to the suggestion that at-retirement guidance can be delivered by providers.
“Consistency in the output of this guidance is also critical. It should be the case that whoever delivers guidance to an individual, the result should be two-fold. First, a report completed to an industry-approved standard providing a view of the individual’s financial situation. Second, an indication of where and how they can arrange a meeting with a financial adviser appropriate to their needs.
“The report produced at this stage should be the ‘stepping stone’ that enables them to approach a financial adviser with at least a single snapshot of their wealth as they begin to phase into retirement.”
Walker continues: “If people get the accumulation phase of their retirement planning wrong they have options – they can work for longer, save more or take more risk with their investments to try and make up the shortfall. If people get the decumulation phase wrong and run out of money they have very few options, aside from relying on state benefits or going back to work. Neither of which may be desirable. Full, professional financial advice offers the individual the best chance of avoiding these circumstances.”