Pensions  

RDR has been ‘fantastic’ for retirement income planning

The Retail Distribution Review, which is one year old in a matter of days, has been “fantastic” for clients approaching retirement as it has “significantly” improved professional standards and has opened the door to a wider range of product options.

The new rules, which came into force on 1 January this year, required advisers to achieve a higher level of qualifications and forced independent advisers to review a wider range of product options to include that could potentially meet a clients’ needs.

In a video interview with Money Management deputy editor Aimee Steen, Simon Smallcombe, UK managing director at Axa Lifeinvest, outlined the major issues facing prospective retirees in the face of rising longevity, but said the higher quality of advice would mitigate these effects.

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He said: “The great thing for those taking advice today is that the level of professional standards in advice has increased significantly with the RDR. This is fantastic for those that get advice early in their retirement process.

“The other positive part is the number of solutions available to them... with alternatives to [conventional annuities] such as impaired life annuities, fixed-term annuities, flexible annuities and obviously drawdown if people want to take that level of risk.”

Mr Smallcombe said of those approaching retirement the number of product options has increased also and that clients in particular can benefit from protection that will “guarantee what they will get as an income in 10 years’ time”.

He said the biggest risk facing those retiring now and in the future was longevity risk, which he said also represents the largest disparity in expectations versus reality as people plan for a short retirement but must make income last “25 to 35 years”.

A factor in this was product choice, with most people traditionally taking or being advised to take conventional level annuities, rates for which remain “awful” and that do not protect retirees against the pernicious effects of inflation.

To watch the full interview, click here.