Multi-assetAug 31 2016

Pension freedoms drives demand for income-focused products

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Pension freedoms drives demand for income-focused products

Demand for income-focused products has increased significantly following the introduction of the pension freedoms in April 2015, according to the latest adviser research by Baring Asset Management.

In March 2014, Chancellor George Osborne announced all caps and limits on drawdown would be stripped away.

Savers no longer face the 55 per cent penalty charge if they try to take the rest of their pension after the 25 pre cent tax-free lump sum, but are taxed at marginal rates - meaning the basic rate of 20 per cent for most pensioners.

Research from Barings published today (31 August) shows one in seven financial advisers - 15 per cent - say there has been an increase in their at-retirement clients investing in income-focused investment products, a year after the new rules came into force.

From online research commissioned by Barings amongst 120 IFAs during May 2016, more than a quarter - 28 per cent - report an increase in at-retirement clients expressing concerns about the impact of the changes to the pension rules.

Almost two-fifths - 37 per cent - say there had been an increase in at-retirement clients cashing in investments or seeking cash, whilst 13 per cent report an increase in at-retirement clients which have asked about unsuitable investments.

With regard to near-retirement clients, a third - 33 per cent - report an increase in concerns about the impact of the changes, with 15 per cent reporting an increase in near-retirement clients investing in income-focused products.

An additional third - 33 per cent - say that near-retirement clients had so far undertaken no change to portfolios in light of the new pension legislation.

Barings said its IFA barometer found a quarter of IFAs - 27 per cent - are specifically encouraging investment in multi-asset products to combat current market volatility.

Marino Valensise, head of multi-asset and income at Barings, said: “The UK pensions landscape has changed significantly since April last year, with many more options in how people can save in the run-up to retiring and also how they take income in retirement itself.”

ruth.gillbe@ft.com