Another survey has revealed people are undecided about what they will do come the pensions freedoms in April, with Blackrock’s head of UK retail stating this confirms the need for proper guidance and advice.
The firm’s latest Investor Pulse survey of 2,000 people aged between 25 and 74-years-old at the end of last summer revealed 28 per cent of baby boomers are undecided, while 26 per cent will opt to stay invested in their pension plan taking regular withdrawals and use part of it to purchase an annuity.
Some 17 per cent will withdraw all of their pension and invest it elsewhere, while 9 per cent will invest it to generate an income and 8 per cent will put it into a cash savings account.
These findings echo those carried out by the National Employment Savings Trust, which found that more than one in five did not know what they will do when new freedoms come into force, while 19 per cent plan to convert some of it into a regular guaranteed income and invest the rest in a way that gives an income from it.
Tony Stenning, head of UK retail at BlackRock, told FTAdviser that within this ‘baby boomer’ sample of those aged 55 to 74-years-old and not fully retired, 81 per cent said that they do not know how to get the best income generating investments.
He said: “This presents a great opportunity for advisers to help them find income generating assets to help them through retirement.
“It is where advice can help them understand the value of investments as opposed to cash, they’ve worked to make this money all their life, now they need their money to work for them.”
Mr Stenning also drew attention to the fact that despite annuities fall from grace since the Budget announcement last spring, roughly one in four respondents still plan to use at least part of their pot to buy a guaranteed income for life.
He said: “I think we are gradually moving towards a US-style market, they have never been forced to annuitise, but still have booming annuity sales, as people still want something regular to keep the lights on, while using other income to drawdown for other things.”
Mr Stenning added that increasing demand for income investing is being driven by traditional sources like government bonds and cash being crushed in recent years, “so people have had to go elsewhere, utilising multi-asset and global funds”.
The research also highlighted a perception gap between what people think they will need in retirement and what projections show they will actually need, something which he again suggested proper financial planning was crucial for.
The baby boomer cohort believes they will need £23,000 per year in household income at retirement, but think the pot they need is £304,000 to achieve this – when in fact it would be £440,600 according to William Burrows’ joint-life annuity calculation based on UK actuarial aggregate rates data.
peter.walker@ft.com
