Following the Government’s announcement on retirement reforms and free advice today, Chris Noon, Partner at Hymans Robertson commented on the recommendations:
For retirees
“Any kind of advice for consumers on retirement planning is welcome, but one-off advice at 65 is too narrow and too late for most people. Guidance needs to start 10 years earlier and be available throughout retirement whenever people need to understand their position. A one-stop visit likely won’t be enough and it certainly isn’t a silver bullet. If people are free to spend their pot in how they choose, then they have to understand the full picture facing them over 30 years of retirement. That means looking at the broad context of their employment situation, family, health and wealth.”
On using digital guidance
“The Government has given the thumbs-up to digital forms of guidance. We believe that is the right move – it makes the scheme more viable, enables personalisation for each individual and harnesses technology where it can help. The challenge will be replacing expensive and scarce human experts with cost-effective 24/7 virtual experts, while avoiding model and conduct risk. We’ve seen expert systems being used to help people in other areas of their lives including medicine, so it’s time for the pensions industry to be embracing these systems. “
For insurers
“Statutory guidance may come to be regarded as an agent for cultural change at insurers. Many are already working hard to strengthen customer relationships in the crucial years before retirement – where meaningful interventions can be made – which could make the statutory guidance irrelevant.”
What people will do with their freedom – research statistics on retirement choices
1. Hymans Robertson asked 1,000 existing Defined Contribution pension scheme members “Under the new rules which option do you think you would choose when you retire?”:
a. 25% – Use most or all of my pension pot to buy an annuity
b. 32% – Use some of my pot to buy an annuity but take most of it as cash
c. 12% – Don’t buy an annuity and take my whole pot as cash
d. 31% – Don’t buy an annuity, keep control of my money and draw an income from the pot each year
2. Hymans Robertson asked 1,000 DC scheme members aged between 50-65 “how much of your pension pot are you likely to spend in the first five years of retirement?”:
a. 13% – None of my savings
b. 53% – Less than 25% of my savings
c. 23% – Between 25 and 50% of my savings
d. 5% – Between 50 and 75% of my savings
e. 2% – Between 75 and 100% of my savings
f. 3% – All of my savings
|
