Stephen Lowe, group communications director at Just Retirement, said that the days since the referendum results were announced should be seen as a “stress test” of the longer term financial planning of many of those who have used pension freedom rules to keep pension funds invested via drawdown plans.
“Drawdown is now seen on offer to mass market customers with modest pension funds rather than being just for wealthier people who can ride out financial storms,” he said.
“In recent days drawdown investors have been warned to think twice before taking pension money. That’s not much help for the many who are relying on taking that money to pay the bills and put food on the table.
“What we have seen in the last few days can be seen as a stress test for what is likely to be many years of uncertainty.
Anyone feeling anxious about what is happening now should consider if they are putting at risk money they are relying on to underpin their living standards later.”
Industry figures suggest about 80,000 drawdown plans were purchased in the 12 months since the pension rules changed in April last year with an average fund invest of £66,000. A similar number of guaranteed income for life solutions, offering payments that aren’t affected by market volatility, were purchased with an average fund of around £53,000.
“There are more choices than before and people have to strike a balance between how much certainty they want and how much risk they are willing to take.
“Our view is that true pension freedom is having enough income to cover day-to-day living costs that is guaranteed to last for retirement. Once that core of income is in place, you have the freedom to invest, spend or give away what’s left.
“There’s a lot of talk about the cost of guaranteed income for life solutions like annuities but not so much about the overall value they provide. Given the uncertainties of today’s world in terms of how investments might perform over the next few decades or how long someone might live, buying peace of mind is going to have a cost. That’s true whether you are a professional looking after a large pension scheme for many members or an individual retiree trying to plan for your own retirement.”
|
