The Later Life Academy (LLA) has called on the FCA to broaden the terms of reference for its Retirement Outcomes Review to include savings outside pensions.
The LLA said in a statement that the current terms of reference, which it said focused exclusively on converting pension pots into retirement income, were “too tight”.
It claimed that 85 per cent of retirees had wealth outside of pensions. The body accused the regulator of approaching the study as if the “old market” still existed – where retirement income was determined by a defined benefit scheme and annuities.
The LLA said retirees were now facing three issues: pension freedoms; the economic environment, particularly low interest rates; and social changes, which includes the removal of a default retirement age, increased longevity and changing attitudes to working in retirement.
These features were “combining to create a completely new retirement market that is in its infancy”, the LLA added.
Chairman Bob Champion urged the FCA to include “housing wealth” in its review.
“Equity release, with its guarantees for homeowners has never been so cheap and you only need to look at the growth in demand, activity and lending volume to see how it is becoming a much more accepted solution in retirement,” he said.
He also urged the regulator not to “stifle” the retirement income market.
Mr Champion added: “This is a new retirement income market in its infancy and while the regulator shouldn’t treat it with ‘kid gloves’, it should certainly do all it can to encourage its development.”
The chairman highlighted the difficulties of tackling the so-called “advice gap” and said the FCA should focus on closing this over chasing an advice model that would be unaffordable for most savers.
“There is a huge gap between what is delivered and what most consumers actually need to provide their own retirement solutions.
“It would be far better to focus on closing the advice gap, and seeking improvement in consumer outcomes, rather than chase a perfect advice model that is not available or attainable, and far too costly for the majority of the UK population.”
Steve Danson, a chartered financial planner at Banks Wealth Management, said he agreed that the FCA should broaden the terms of reference to extend beyond pensions. However, he was sceptical about putting too much emphasis on equity release.
“If someone lives in a big house, and wants to release some of that equity, it’s usually better value to downsize. I don’t think equity release is great value. It’s a last resort,” he said.
The dangers around the advice gap were revealed in a study this week by Citizens Advice that showed almost a third of retirees were parking their pension pots in cash. Mr Danson urged the government to subsidise advice for lower-income people.
“It’s all well and good having Citizens Advice there, but it isn’t advice,” he said.
james.fernyhough@ft.com
