“The popularity of pension freedoms has left people needing more help to select the right retirement income product. To get the best possible outcome ideally people should seek financial advice, but it’s recognised that not everyone will do this.
“As the regulator, it’s for the FCA to set consistent standards across the whole retirement income market income rather than leaving the job to a trade body to create voluntary standards. This will give much more effective consumer protection, forcing widespread adoption by all providers and schemes offering income drawdown, annuities and other cash withdrawals.
“The FCA is already looking at how people can compare retirement income products, particularly flexi access income drawdown. The Retirement Quality Mark shouldn’t jump the gun and await the outcome of this before forging ahead.”
To help the debate, Aegon sets out what to look for when picking a flexible drawdown product:
1. A good range of investment funds – if you opt for drawdown, you are keeping your funds invested so it’s important the provider offers a comprehensive risk-rated range for you or your adviser to choose from, allowing you to decide how much risk you are prepared to take.
2. High quality fund managers – having a range of funds to pick from is important, but so is getting good investment performance. The higher the returns within your risk appetite, the longer your money will last, although values can go down as well as up.
3. Flexibility to vary the income you take – one of the key benefits of this product is being able to adjust your income from time to time as your personal circumstances or income needs change
4. Option to choose guarantees – some providers offer you the option to pay an extra charge to guarantee your income will continue as long as you live
5. Access to advice – you may decide to seek professional advice and some products allow you to pay for that out of your pension pot
6. Online digital access and ‘what if’ tools – this allows you to keep track of how much your pot is worth and to check how long your pot is likely to last if taking different levels of income
7. Competitive charges – the level of charges at outset and on an ongoing basis will affect how much you have left in your pot and how long it will last
8. Offered by a regulated provider – make sure you pick a provider that is regulated by the FCA, giving you the assurance it is well managed and financially strong
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