Claire Altman, Managing Director for Retirement Income at Standard Life, said: “Decisions regarding retirement income are some of the most complex financial choices individuals face. Pension freedoms triggered the move from simplicity and security (albeit at a price) to complexity and choice, including the chance to make bad choices. The numbers of people retiring with DC savings will only increase following the massive success of auto-enrolment. But we need to remember that DC was not chosen by policy makers because they wanted to give individuals the responsibility of managing their own financial retirement decisions but was a by-product of the move away from DB once it was no longer affordable for sponsors. We have not yet as an industry properly grappled with the full implications of that decision by policy makers – over 50% of retirees do not currently have help with managing their financial decision making at retirement.
“Those currently supported by an adviser are well placed to navigate the challenges associated with managing their retirement income such as determining an appropriate withdrawal rate from a drawdown fund, market volatility and longevity considerations. But we need to make sure that those people who are not currently supported by an adviser get access to some kind of help. Now is a good time to look again at how the retirement income advice market has developed particularly as the tables have turned and we have now entered a period of higher annuity rates so retirees have a greater chance of being able to benefit from income certainty in retirement as well as flexibility.”
Steven Cameron, Pensions Director, said: “After a pause for the pandemic, the FCA has announced it is recommencing its thematic review into retirement income advice, although with little detail on scope. The timing now overlaps with an intense period of preparing for the new Consumer Duty which is likely to lead to some changes in adviser retirement advice propositions.
“Retirement advice is central to many adviser businesses and is one of the most complex – as well as valuable - areas of financial planning. Advisers need to help their clients navigate many uncertainties including future and varying income requirements, short and long term investment returns, inflationary trends and of course how long clients might live. In new Consumer Duty terms, this presents many foreseeable harms which advisers will be considering as part of delivering good outcomes. Some such as running out of money too soon, or taking less income than is sustainable, can be in conflict.
“While preparing for the new Consumer Duty, we expect many adviser firms will be reviewing their retirement income advice propositions and we hope the thematic review will allow for these. While it may be difficult to completely avoid all potential foreseeable harms, we expect advisers will be making all of these clear to clients so they can agree which need avoided as priority.“
FCA Thematic review of retirement Income Advice
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