Annuities are re-earning their place in people's retirement plans as rates have become more attractive in the current economic environment, according to the guests on the latest episode of the FTAdviser podcast in partnership with 7IM.
Sandy McGregor, head of compliance policy at SimplyBiz, said it is a challenging environment for advisers, as markets are volatile, interest rates are up and inflation is high, but the message has started to come through that annuity rates have increased substantially.
"We've been through a period where drawdown has been very prevalent, annuities perhaps weren't offering that value. And perhaps advisers need to now go back and perhaps look to understand that annuity market again. Perhaps they've let their knowledge drop in certain respects in that area."
He said there was a real uptake in the number of advisers attending annuity themed Simplybiz events, especially when it comes to recent innovations.
Paul Clifton, director of wealth planning at Arbuthnot Latham, agreed: "With the annuity rates increasing there has to be more consideration given to this type of area now, particularly with the impaired and enhanced rates that are available, that a lot of people would actually qualify for."
Arbuthnot Latham typically deals with executives and entrepreneurs who might not always fit the annuity model personality wise, but he said "it's certainly something that we should be exploring with clients and just making sure that people are getting the right advice."
He said providers have been innovating since the pension freedom reforms, so "there is a bit of flexibility, there are other products out there, but typically I think the annuities and the flexible retirement approach, blended together if necessary, does offer most advisers most of the flexibility they need."
He added having a flexible approach to retirement planning was key for most clients.
"The main focus is on having flexibility to access the pensions or investments or whatever other assets they're using to fund their retirement, if they are indeed retiring at the right times," he said.
"And actually financial plans have a lot of flexibility built in because lives change and people's attitudes change. A lot of people reflected during the pandemic about their working habits and how they see things moving forward. So yes, flexibility is the key."
To hear more about retirement advice in the current economic environment, and what the regulator's retirement income review and consumer duty could mean for advisers and their clients, click on the link above.
carmen.reichman@ft.com
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