16th June 2014
A nationwide organisation of pension advice outposts and lifetime pensions should be the future of retirement in the UK, according to expert Ros Altmann.
Working with insurer MetLife, Altmann has produced a blueprint for pensions, and crucially, pension advice in the UK.
She wants to introduce a National Wealth Service and other ‘fundamental’ changes to the way retirement advice is provided. The Budget introduced the ‘guidance guarantee’, which will be funded by insurance companies, but Altmann wants to go one step further to ensure retirees make the most of their pension savings.
She has called for the launch of a National Retirement Guidance Network from April 2015 that will focus on those about to retire. It could be integrated into workplace pension auto-enrolment and provide financial ‘wealth-checks’ for all savers.
This would ensure retirees understand the options open to them in retirement, particularly in light of the introduction of new pension freedoms in the Budget.
‘To make the new freedoms work for individuals, a revolution in the provision of financial education, information and advice is required,’ said Altmann.
The advisers working for the service would have to make their charges clear with no hidden commission. There should also be a low cost option for people and employers should be incentivised to provide advice by increasing the current £150 a year tax allowance for providing advice in the workplace.
‘These regulatory changes could have a dramatic impact on the advice industry and provide greater protection for customers who would otherwise not have access to the first-class service of an adviser,’ she said.
Altmann said retirees will need increased advice in future as their pension pots become more substantial thanks to the auto-enrolment reforms and greater flexibility in the way pensions can be accessed. A MetLife survey shows 24% of working people or 7.3 million individuals – are planning to start or increase their pension contributions after the Budget changes.
As the Budget changes mean everyone can access their entire pension pot at age 55, Altmann said there is no longer a need to move a pension into an annuity.
She said this new way of working could make way for a new pension product, the ‘lifetime pension account’.
‘These funds could be a combination of ‘pension growth’ funds and ‘pension income’ funds,’ said Altmann in the report. ‘For the initial years, the fund would roll up all income and aim for stronger capital growth. However, once the customer reaches later life, they can just contact their pension provider to ask them to start paying out income. The income paid could be that generated by the assets, or somewhat more, or less, as the customer requires.’
The timing and amount of the money requested would be left to the customer and there could be different grades of fund and could be managed online.
‘They could be personalised to be used as a lifetime savings account into which people transfer any pensions when they leave and employer’s scheme and could hold other investments too, such as ISAs [and] share schemes,’ said Altmann.
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