PensionsDec 29 2014

Partnership predicts ‘dash for cash’ in April

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Partnership predicts ‘dash for cash’ in April

Specialist annuity provider Partnership predicts consumers will ‘dash for cash’ in April when the new pension freedoms come in, with some firms set to take advantage of consumers.

Speaking to FTAdviser, Partnership’s head of product development Mark Stopard expects to see a “significant amount” of product and ‘concept’ launches designed to appeal to consumers who can now access the new pension freedoms.

“We are also likely to see a ‘dash for cash’ in April as people look to access their pension pots to deal with immediate issues such as debt and mortgage repayment (or even just the holiday of a lifetime) without considering the longer term implications.

“Sadly, there will be some companies that take advantage of this opportunity to sell financial products which are either not right for retirees or just too risky for most ordinary investors.”

He also expects that savvier consumers will become more involved in managing their retirement finances.

“We believe that we will see people looking to secure a guarantee for a proportion of their income to cover essentials and then using the rest of their fund as they see fit. When or how they do this will naturally be their decision, but eventually we may well see people working later and making these types of choices in their seventies.”

As for where annuities fit into this brave new world, Mr Stopard said his instincts suggest the products will survive and have the potential to thrive, but providers like Partnership need to clearly demonstrate the benefits they offer.

“Annuities are no longer perceived as the default option so we need to work hard to make the case for these products with consumers and intermediaries. Words like longevity, medical underwriting and guarantee need to be brought to life.”

Mr Stopard added that fault lines between guidance and advice will be exposed as people start to understand the enormity of the decisions they will now need to make.

“Moving from a situation where you have a regular income to one where you have the potential to decide how much to use each month is likely to be a difficult journey for many.”

peter.walker@ft.com