With significant changes to the pensions market announced in the budget, Partnership undertook research to ascertain what consumers considered to be the most important features for a retirement product.
Guaranteed income for life (64%), getting as much income as possible (31%) and income which keeps track with inflation (24%) were the top attributes of the ‘perfect retirement product’. In addition, people were looking for a product which was as tax efficient as possible (21%) and gave them control over how much income they received each month (17%).
These features are generally available as part of a standard or enhanced annuity product or can be chosen as part of the overall product package [see comparison below].
|
Top feature |
|
Provided by an annuity? |
|
Guaranteed income for life |
64% |
Yes |
|
Getting as much income as possible |
31% |
Yes – Best Buy Standard/enhanced product |
|
Income which keeps track with inflation |
24% |
Yes – RPI product |
|
Structured to be as tax efficient as possible |
21% |
Yes – Pension transferred to annuity remains within tax wrapper and allows 25% fund tax free |
|
Control over how much income I receive each month |
17% |
Yes – Drawdown products |
The research which asked over 2,000 people between the ages of 45 and 70 about their preferences also highlighted that 15% people want a very low risk product (i.e. could never lose all their money), 14% want to ensure that their spouse or partner would receive an income if they passed away and 12% saw the opportunity to leave an inheritance as important.
Andrew Megson, Managing Director of Retirement, commented:
“While the recent budget announcement has been hailed as the death knell for annuities, it is interesting to see that the features that most people want from a retirement product are essentially those offered by a best buy standard or enhanced annuity.
“Running out of money in later life naturally appears to be one of people’s biggest fears which is a real concern as so little is really understood about longevity. Indeed, not only do the majority of people underestimate the time they will spend in retirement, their estimates are based on simple averages so some will live ten or even twenty years more!
“This clearly highlights the fact that rather than attacking the industry as a whole, we need to concentrate on helping people to make the best choices for their own individual retirement needs. Partnership has been campaign for more consumer choice around retirement income for years and therefore, we are delighted to have launched the Enhanced Choice Annuity.
“This product is a lifetime annuity with a 1-year cash-in option which not only provides people with time to consider their options – post budget –but also protects them against interest rates falls.”
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