Personal Pension 

Heavy on your minds

Routine longevity underestimations will be the retirement income killer, should people live just three years longer than 2050 expectations.

This is the latest warning to blight the at retirement sector, having marched forth out of the International Monetary Fund’s analysis of longevity risk impact.

And according to Aviva’s Spring 2012 Real Retirement Report, over-55s are looking increasingly fearful about their financial future.

Having said all that, the report showed over-55s were actually better off financially, with inflation fall, average monthly income rises and a 24 per cent increase in savings pots.

But unstable interest rates, volatile stock market and speculation of further quantitative easing is not painting a particularly rosy picture for annuities and drawdown. Let us also not forget the Solvency II and gender directive forces at work.

So how is the market shaping up to manage the turmoil it faces?

Bob Bullivant, chief executive of Annuity Direct, said poor pension saving should be a focus in knocking the retirement market into shape.

One of the hot topics in this respect has been pension minister Steve Webb’s BBC Radio 4 announcement about workplace pension schemes.

In a nutshell, the minister suggested introduction of defined ambition schemes. The risk would be shared between employer and employee, as opposed to just one or the other as with final salary and defined contribution schemes respectively.

Mr Bullivant said clients at retirement were generally savvy and wise. It was those saving towards it now, with lack of interest in building up their pots that were of massive concern.

Talking in terms of retirement income was key to stopping people arriving at retirement with lowly pension pots, Mr Bullivant added.

The last eight months have showcased a more buoyant stock market and inflation drop which has turned investment risk into investment gain for pension savers.

But according to Mr Bullivant, who knew what the future held in such uncertain times?

Annuity Direct clients are those seeking at retirement incomes. The firm has found it “a tricky call” to make the best of uncertain interest and annuity rates.

He said: “Clients have been losing sleep over worrying about their retirement and financial future. We put their minds at rest because what they need is a truly independent adviser to shop around and really use the open market option. This is imperative.”

The ABI has been trying to drive the open market option forward, with a code of conduct, insisting all its members sign up. Mr Bullivant said the market seemed to be heading in the right direction.

“The real issue with drawdown is not the amount of income available. That is looking at it the wrong way round. The minute you start chasing income, it is problematic. It needs proper risk analysis,” Mr Bullivant said.

The short answer to the retirement conundrum at the minute, he added, was that it was very difficult to get clients what they desired. Unfortunately we are in a position where the market is where it is. But there is only way of doing this, and that is through an IFA and properly,” Mr Bullivant said.

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