Innovation is nothing without clarity

Stephen James

In the response to the story on product innovation in the pension industry (FT Adviser, 31 May), there are two issues which need addressing.

First, consumer confidence. The issues surrounding Tata Steel’s defined benefit scheme is a great example. Defined benefit is one of the most secure pension rights there is, and even that is not safe. Why trust things such as tax-free cash in retirement given this backdrop. A guarantee that pension benefits will be honoured is needed. This includes retirement access age.

Second, product comparison. There have been a number of innovative products that have graced the market in the past, going back to the days of phased retirement with annuities and predating drawdown. However, the industry has never been able to be clear about the products and administer them, let alone compare one against the other.

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Now we have annuities with guaranteed periods, temporary annuities, enhanced annuities, capital protected annuities (which, bizarrely, protects clients up until their 75th birthday), drawdown, guarantee for life funds, etc.

The issue isn’t innovation. The issue is explanation and comparison.

Stephen James

Financial Adviser,

Charles Derby Financial Services,