National advice firm LEBC has seen an increase in the take up in annuity purchases, signalling exercising pension freedoms to access a retirement pot all at once is not the correct option for everyone.
The firm’s director of public policy, Kay Ingram, said over 70 per cent of its clients have secured an enhanced guaranteed lifetime income after taking up advice.
Ms Ingram argued that savers need to be aware that while there can be many benefits in exercising pension freedoms, there will be a need to manage the investment of funds and rate of income withdrawal, to make their income sustainable throughout life.
With the introduction of pension freedoms in 2015, savers have been seeking to take advantage of the high transfer values of defined benefit (DB) schemes and to move their nest eggs into defined contribution plans.
Figures published by Mercer in April showed that as much as £50bn has been pulled from final salary pension schemes in the last two years.
According to figures released by HM Revenue & Customs (HMRC) last week, more than £14bn has been unlocked from defined contribution (DC) pensions since pension freedoms came into effect.
Ms Ingram also argued that fees for advice need to be transparent and agreed in writing in advance of any client committing to a service.
She said: “Most reputable advisers offer an initial consultation without charge. Ideally a fixed fee for the second stage of advice should be charged, regardless of the outcome of the advice, that ensures impartiality on the part of the adviser.”
Regarding consumers that are not obliged to take on regulated advice – with savings below the £30,000 threshold – LEBC is calling for a 30-day cooling off period, where the savers would be “referred to a guidance service to give them pause to reflect on their decision before it is too late to reverse it,” he added.
This is part of the firm’s response to the Financial Conduct Authority (FCA) retirement outcomes review, an analysis of how pension freedoms have changed the way retirees access their pension pots,
After publishing an interim report in July, the FCA is expected to publish its final report on this matter this year.
maria.espadinha@ft.com
