After a year-long study into the consumer experience of buying an annuity, the Financial Services Consumer Panel concluded that the market does not work well for the majority of consumers and urged a review. Andy Zanelli, head of retirement planning, AXA Wealth, comments on the need to look at a variety of sources for securing income in retirement.
“We all know that we are living longer and need to be thinking about how we are going to afford to live in retirement. Annuity purchase should be about making the right decision in the context of a person’s overall financial position. For a number of people buying an annuity they may be making the decision too quickly or without all of the necessary information. Financial advice is key for those investors who don’t have all the information. There are risks with annuity purchase since once selected you have the same annuity for life. However, annuities are a good way of providing a constant level of income which can be supplemented by other means.
“AXA’s Big Money Index* has revealed that many people are becoming increasingly aware of the need to begin planning for retirement earlier and that the state pension will not be enough to fund their retirement years. With consumers facing an average pension shortfall of more than £4,600 per year** and unable to rely on the state pension, 40% of people have turned their attention to other methods of supporting themselves during their retirement.
“At a time of low interest and low annuity rates, many people should be looking at all of the assets they have, for example their property or an ISA, and how these can help them to generate income after they have finished working. By considering a wider range of investments people can make the most of all the available tax allowances and have the best chance of living the retirement they want to.”
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