Advisers warn on ‘using pensions as bank accounts’
More than three-quarters (77%) of advisers questioned said the risk of some people spending all their pensions is the biggest challenge the launch of pension flexibility faces – higher even than issues over understanding the difference between guidance and advice and access to advice.
Savers themselves are also concerned – a separate survey found 41% are worried about the risks of outliving their retirement income with 12% saying they will rely on the State.
Advisers fear people using their pension funds as bank accounts and running out of money is a bigger threat than concerns over the launch of the government guidance sessions and access to advice.
Two-thirds (67%) believe clients not realising the difference between guidance and advice is a major threat while 58% worry that a lack of good quality of advice will be a major threat.
MetLife is calling for guaranteed drawdown – which can deliver an income for life no matter how long a customer lives – to be recognised as a category alongside drawdown and annuities in the options presented to customers in the planned free and impartial government guidance to be launched in April 2015. It has launched an information campaign to outline the product category to advisers.
Dominic Grinstead, managing director, MetLife UK, said: “The UK is about to embark on a retirement revolution which should enable us to create a world-leading pensions system.
“But clearly there are concerns and advisers believe the biggest risk to the success of the reforms is people spending all their money and running into trouble as a result.
“Annuities did at least provide an income for life although they had many other major flaws.
“Guaranteed drawdown offers the benefits of certainty and flexibility and should be seen as a potential answer for some clients.
“Advisers have a vital role to play in ensuring savers are aware of all their retirement income options. Recognising ‘Guaranteed Drawdown’ may empower some customers to take advantage of the new flexible pensions framework while retaining the security of income for life.”