'When recommending an annuity, you must get it right first time'

'When recommending an annuity, you must get it right first time'
FTAdviser panel of experts at the Retirement Planning webinar

Advisers need to get annuity advice right when setting it up in the first place, or risk the client not getting the best possible product, Fiona Tait has warned.

Speaking on the latest FTAdviser webinar, Retirement planning in a bear market: time to reconsider annuities?, the technical director for Intelligent Pensions said most advisers would always be looking at the full range of pension options for clients. 

However, she said: "You need to get it right when you first set it up. It's not about shopping around to get the best rate, but also discussing all the options clients have got at the time and what shape of annuity product would be best for them as they move further into their retirement years. 

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"This is important as clients will have to live with that product potentially for the rest of their lives."

Tait was joining a panel of experts on Thursday January 19, discussing the shape of the retirement market and how various policy changes, such as pension freedoms, as well as the current economic environment, posed problems for advisers and clients when it comes to pension planning.

Cecilia Furner, distribution director, retail annuities, for Legal & General, agreed, stating: "It sounds obvious but we need to be outcomes focused for clients."

The panel also debated whether there are enough product variations to add to an adviser's arsenal. Fellow panelist Steve Webb, partner at LCP, said: "Fixed term annuities are perfect for some clients. 

"We are also seeing a rise in people using these as 'bridging pensions'."

He said some clients may be wanting an enhanced income from their defined contribution pension when they want to retire, and not have their actual retirement age driven by the state pension age. 

In these cases, a fixed term annuity could help bridge that gap. 

Consumer duty

Tait apologised: "I'm sorry to bring in the words 'consumer duty' so early on in this discussion, but we need to make sure pensions advice is continuing to deliver value to clients.

"It makes sense to focus on those who have run their [drawdown] fund down, now that interest rates have changed. Annuities come with lower advice and lower product charges, and sometimes these could be suitable for people who have depleted their drawdown pot."

Furner agreed, pointing to an old FCA report on retirement incomes, which showed people had been drawing 8 per cent or more from their pot. "This was during buoyant markets - and now the question is how this is going to change.

"Our end customers - your advised clients - want to enjoy their retirement and have a good experience as they go through that."

Also on the panel was Keith Richards, chairman of the Financial Vulnerability Taskforce. 

He commented: "I agree [with Furner] and the FCA has really been picking up on this issue of people drawing down too much. We know 100 is the new 80. We have an ageing demographic and the spending curve is changing. We need to get on top of this.