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Reform must not leave individuals behind

Reform must not leave individuals behind


Amid dire warnings of people being irresponsible with their money, so far the evidence suggests that they have not gone out to buy fancy sports cars or luxury cruises.

Many have taken some tax-free cash, but with the rest of the money people have been more circumspect; indeed, despite their bad image, annuities may not be as completely dead and buried as some had thought.

Feedback from those coming up to retirement suggests that while officially people do not want an annuity, nonetheless, they want what an annuity has to offer: certainty of income for the rest of their lives.

Faced with no other source of income, the reality of running out of money when one is too old to go back into the workplace has focused many people’s minds.

The financial services industry has responded by trying to offer new solutions for those coming up to retirement. Experts do not tend to talk of annuities versus drawdown any more; it is all about ‘retirement income’.

And so the products are appearing to meet that change. Many varieties are being launched which blend different aspects of managing one’s pension pot, but with the general view that the older one gets, the more guarantees one would like built in to the product.

But while the financial services industry is trying to meet this demand, with fund managers moving into retirement and life offices becoming fund managers, the support for individual is lacking.

Pension Wise was launched earlier this year with heavy advertising, and promises to point people in the right direction, but take-up has been slow. The work and pensions select committee recently published a report that said that only one in 10 individuals eligible to use the service had done so.

The problem is that people need advice, and while many may be reluctant to spend the money, some providers are forcing clients to get proper financial advice before accessing their pensions.

Unfortunately too many people feel like rabbits stuck in front of headlights; it is all very well giving people freedom to do what they like with their money, but the burden of responsibility means they now have to take a lifelong, potentially life-changing decision, without all the information to hand.

It was all so simple when all a client had to do was tick a box and buy an annuity with the pension funds he had built up; now he has to take ownership of his future. Let us hope it does not all end in tears.

Melanie Tringham is features editor of Financial Adviser

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