The study from the Association of Independent Financial Advisers (AIFA) and Prudential UK was overseen by an editorial board that included Rt. Hon John Gummer MP, Independent Chairman of AIFA and Lord Lipsey, ex-Chairman of the Financial Services Consumer Panel.
In the face of increasing longevity and the scaling back of defined benefit pension schemes the report calls for an independent review of the decumulation market, where people use their accumulated assets to finance their retirement. It also recommends that Government and regulators must share a common approach and objectives and recognise the importance of the market in its own right.
Summary of recommendations:
• Regulation and legislation should be based on how consumers behave rather than how perfectly rational consumers would behave
• There should be a review of financial capability programmes to ensure they are improving financial education levels as cost-effectively as possible
• Independent financial advice in the workplace should be better promoted and funded by the Government and employers
• Clear guidance and training is needed for those who provide decumulation advice
• There is a need to continue to develop and improve products, which have a broad band of suitability that can be understood by the consumer
• Product providers should adopt a consistent approach to product features, product suitability, product comparisons, and risk and rewards. An industry standard glossary of terms should be agreed
• Regulation should be amended to allow greater consumer access to advice on equity release
• The level of capital disregarded for retirement means-tested benefits should be reviewed on a regular basis to ensure the rules do not penalise equity release
• The Government should establish an independent review of the rules requiring pension income to be secured by age 75 to ensure they appropriately balance the needs of retirees with the interests of taxpayers
• A critical success measures for the RDR should be that it increases the availability of advice and guidance and raises the level of engagement with consumers
• We recommend the Government commissions an independent review aiming to deliver institutional arrangements that ensure a joined-up regulatory and public policy approach to decumulation
