Pensions  

Keep it simple, stupid

Keep it simple, stupid

All signs point towards simplification next year in terms of pension and retirement product development, according to Fidelity Worldwide Investment’s head of retirement Richard Parkin.

He told FTAdviser that all the conversations the firm has had with advisers point towards keeping it simple.

“We’ve seen a lot of interest in packaged investment products and we expect multi-asset solutions to dominate in the lower end of the drawdown market. Alongside this, customers and their advisers will need simple tools to help understand what level of income it’s safe to take and how to withdraw funds without paying too much tax.

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“Guaranteed income will remain important and I expect people will come back to annuities in part; but advisers can help clients look at other sources such as State Pension deferral or maximising DB benefits.”

Mr Parkin pointed out that 2015 will not just be dominated by pensions however, as new rules on taxation at death are set to make the pension a great place to store wealth to be passed to future generations, rather than drawn on for retirement income.

“Other assets such as Isas and property may become the first port of call for income. I must admit to being nervous as to whether these new rules will survive a change in government, but they open up a much bigger financial planning need for clients and so present another opportunity for advisers.”

He stated that the Financial Conduct Authority’s recent guidance guarantee paper was “at best, equivocal” about the need for advice and there seem to be very high expectations as to how far the guidance conversation will take people.

“We think it’s a welcome addition to the retirement landscape but successful retirement planning needs to be holistic, personalised and ongoing. To get that, many will need formal advice.

“The biggest challenge that lies ahead is having people recognise that and be prepared to pay for it. A more positive message on the value of advice from government and regulators would be a great place to start.”

Mr Parkin added that for some of today’s advised customers, the Budget changes to drawdown make little difference.

“A good number will have had sufficient wealth to qualify for flexible drawdown already. The really interesting opportunity is how we help a new wave of customers looking for retirement flexibility but who perhaps have fewer retirement assets.

“We need to make sure they get the best mix of retirement solutions but we need to deliver this in an affordable way.”

peter.walker@ft.com