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Retirement - June 2014



    And life offices are still coming to terms with the prospect of dramatically falling annuities sales. No one is sure at this stage whether annuities will bite the dust, or if the insurance world will adapt and produce products to suit the current climate and changed retirement parameters.

    While Just Retirement put out its one-year annuity to cater for those waiting until next year when the rules kick in, others have seen annuity sales fall off a cliff. Partnership, which only recently floated on the stock exchange, is mainly focused on annuities and has seen its stock market value plummet too, and even the behemoths such as Legal & General and Aviva, were affected directly after the news last March.

    But over the past couple of months the providers have started to take stock. And while question marks still hang over the traditional annuity sector, those in support of the product insist that many annuity products still serve a good purpose, not least because they offer a promised income.

    But the retirement world is also changing at the accumulation stage. Auto-enrolment is designed to persuade, if nothing else, those lingering few that they need to do something proactive to avoid poverty in old age, and to help everyone put some money aside.

    The biggest companies that have experience with pensions, have so far sailed through the early stages of auto-enrolment; it is the smaller businesses that face a bigger challenge. For many this will be the first time they have ever engaged with ­company pensions, and for those to whom it has come as a big surprise, they have to contemplate dealing with a financial services regulator and looking after their employees more.

    But for advisers, auto-enrolment is a good opportunity — as long as they know how to pick their client. The ideal client is the responsible employer who opens official-looking post promptly and takes its responsibilities seriously; the less attractive client is the one that leaves everything to the last minute and then blames the adviser if it all goes wrong.

    But for those advisers that get on board the auto-enrolment wagon, the fees can be promising and the choices plenty. It is important to take care over which type of system to go for: master trust or a group personal pension.

    For once, pensions are making the headlines for the right reason; let us hope that the next few years can be navigated carefully.

    Melanie Tringham is features editor of Financial Adviser

    In this special report


    Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

    1. How many small and medium-sized companies still have staging dates due in 2014?

    2. How said in 1997 that a reason for not buying an annuity is “simply that annuities are a lousy form of investment”?

    3. How long do smaller firms need to set up a suitable pension arrangement and ensure payroll and other systems are effective, according to Danny Tsang and Christine Johnstone?

    4. How much business to variable annuities account for in the US each year?

    5. What percentage of employers are, according to a May 2014 survey, still in the dark about their approaching staging date?

    6. What is the uncapped daily fine The Pensions Regulator can levy for employers with 50 to 250 employees?

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