20th March 2014
Retirement income specialists Intelligent Pensions says that many people should still buy an annuity even if they don’t have to.
Andrew Pennie, Marketing Director said “Retirement income planning is, and always has been, about delivering a sustainable income to meet a client’s needs. Nobody wants their pension to expire before they do! Given the increased flexibility of how benefits can be taken, it is likely more retirees will need specialist advice and guidance on how to achieve sustainability”.
Pennie added “By removing the link to GAD and the need for GAD reviews, the government is effectively removing its ‘unspoken advice’ of how much people can take from their pension. Australia has a similar system and encouragingly, retirees appear more engaged with their retirement planning and are genuinely using their savings to provide retirement income.”
The Chancellor, George Osborne, stated that after 2015 nobody will have to buy an annuity and this has caused billions to be wiped off the value of insurance companies. However Pennie says: “While it is true that retirees will not have to buy an annuity, many should buy one!”
“Annuities remain the only way to insure against longevity and inflation. Undoubtedly, many smaller pots will cash-out rather than buy an annuity but for the majority of investors with a reasonable pension fund, it is still a case of ‘when to annuitise’ rather than ‘whether to annuitise’”
Pennie believes that the free advice/guidance referred to by the chancellor will be crucial to helping people understand the issues and risks at play and that this process must commence years before taking benefits to deliver appropriate and effective investment strategies.
He says: “We strongly believe the adviser profession is best placed to deliver good outcomes and that advice must be available before, at and after retirement. We look forward to promoting the experience and expertise of the adviser profession during the consultation process. ”