How pension simplification made pension planning more complex

  • Learn about the range of retirement planning principles
  • Consider the best approach to getting information from a client
  • Understand when to consider using an annuity
How pension simplification made pension planning more complex

Taking benefits at retirement has become more complex every year since pensions simplification was introduced, with the biggest non-event being the pension freedoms. This was billed as the biggest shake up of retirement options in years and giving back control of pension funds to all.

This was not really about the cash if you think about it; what actually happened is that the maximum income from drawdown was removed. It had not been compulsory to buy an annuity for some years but this was not most people’s impression so the freedoms felt more than they really were. 

Assessing requirements

One of the biggest challenges when advising a client at or close to retirement is trying to ascertain what their income needs will be in the future. Retirement is rarely a single point in time for many people these days, so this could be a moving target. All clients are different and so understanding not only their financial needs today, but also their hopes and dreams for the perfect retirement is key.

Key points

  • Ascertaining a client's future income needs is one of the biggest challenges that a pension adviser faces
  • These days retirement is unlikely to involve a single event, but a number of events and decisions over many years
  • In many instances annuities can offer value for money but getting the timing right is critical to a positive outcome

It is clear that it is not the adviser’s job to pass judgement on how a client wants to spend their funds, but knowing what they see as essential and what is not is important nonetheless. A very detailed fact find with as much information about their day-to-day costs and possible one-off expenses in retirement is the only way to get a handle on what is needed and when. It is not unusual for a big trip to be planned or for significant changes to be planned to the house that have been put off for years.

Getting the information from the client in their words can give the best insight into how they think – just having a set of boxes to tick will never get the whole story. With a husband and wife there is always the possibility that they will disagree with what is a priority, which could be difficult but it is essential they are both party to discussions to avoid any nasty surprises down the line.

What have they actually got to work with? This is not just about the pensions they have, but if they expecting an inheritance; or if they intend to move into a different home; and do they have other savings, such as Isas?

When looking at the home, you hope that by the age of retirement this should be mortgage free, if not, then when assessing income you will need to ensure that this is factored in for the remainder of the mortgage. Many clients feel they will be able to release capital from their home later in life by downsizing, but a smaller house may not necessarily release the expected capital. Being realistic about the value of this is very important.

To an adviser it is clear that not all pensions are equal, but a client may not realise the major differences in what they have. A lot of the noise around the pension freedoms was all about how great being able to have flexibility is, but the reality is often very different. 


Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. According to Claire Trott, what is one of the biggest challenges when advising someone of their retirement needs?

  2. According to Claire Trott, a tickbox approach to a factfind will provide adequate answers, true or false?

  3. According to Claire Trott, what is the most important factor to consider when looking at a client's home?

  4. How much is the full state pension a year?

  5. Pension funds are counted as being inside the estate of the member, true or false?

  6. When can buying an annuity be the wrong thing for a client, according to Claire Trott?

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You should now know…

  • Learn about the range of retirement planning principles
  • Consider the best approach to getting information from a client
  • Understand when to consider using an annuity

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