Pensioners need your help. That is the first thing I thought of when I heard George Osborne’s promise for “freedom and choice” for all.
Why? Because unlike many commentators at the time, I don’t think the majority of the British public will be capable of working out how they can sustain an income from their pension fund for their entire retirement.
Don’t get me wrong, I support the desire to encourage people to save more for their retirement. One of the largest problems we face as a society is that too many people are not saving enough for their retirement. I fear that too many people will draw down their funds too quickly and undo all the hard work of saving in the first place.
About a year ago I was speaking to a financial adviser with more than 40 years’ experience and he offered an interesting sound bite about retirement planning.
He said: “The British public in retirement often does the right things poorly. The financial services industry needs to engage with [the people] to help them do the right things well.”
This certainly rings true of annuities, but takes on greater meaning post Budget 2014. It also holds true when looking at the results of some large-scale research Old Mutual Wealth has just completed on retirement income in the UK.
It shows that retirement income isn’t just about pensions. People are rightly looking across all their wealth for income, but those who use a financial adviser are more strategic in their income planning and more satisfied with the results in retirement.
While George Osborne’s pensions revolution will deliver greater freedom to extract income from pension savings, there will be a greater need for advice. Individual planning will become a necessity to manage ongoing solutions as personal circumstances change along the way.
The need to provide investment solutions that offer a sustainable, long-term retirement income strategy, combined with how that income can be delivered as tax efficiently as possible, will be easier to achieve where the savings can be managed using the tools and investment solutions of a platform.
A simple example is the decision of whether to apply a future investment into an Isa or a pension, given the new freedom of how the pension investment could be extracted beyond the age of 55.
The ability to make these calls, dependent on an individual’s particular circumstances and especially at times like tax year-end, will be easier to achieve where both wrappers are managed in the same platform.
There is, of course, also the issue of legacy products, which may still only offer an annuity through the open market option. There is a case for restructuring such existing savings into modern product offerings to allow effective holistic retirement income planning and advice.
The guidance guarantee for those approaching retirement will provide some help, but ultimately will only be guidance and not advice.
It is no surprise that the suggestion of who pays for it has not been universally welcomed. However, it is vital the direction of traffic from such guidance will be access to full advice to deliver the bespoke planning solutions.
Platforms will be a key part of the jigsaw in delivery of those outcomes.
Steven Levin is head of global distribution at Old Mutual Wealth
