Chris Prior is manager, sales and distribution at Bridgewater Equity Release
As we draw closer and closer to the pension changes that will be introduced in April, the noise around their potential implications and the issues that might be raised grow larger and larger.
Just in the past week I have seen numerous references to a potential communications gap and the suggestion that we are moving into tricky waters with many pensioners left stranded simply because there is a lack of clarity around what they can and can’t do. One also wonders whether industry stakeholders have had enough time to develop and test their systems and processes in order to be fit for purpose post-April 6th.
I hope so but I fear not.
There is clearly a level of uncertainty about what is achievable, what is not and how this might impact on an individual’s retirement income – not just now but well into the future. It was not a perfect system but there was a certainty around the fact that all pensioners needed to purchase an annuity, however, greater freedom and flexibility can take that certainty away. I found True Potential’s latest research interesting in that regards, it stating that 76% of 55-64 year olds currently have no idea how they will take income from their pension. And 40% of all 2,000 people surveyed – across all age groups – said that a consistent income was the most important factor in retirement.
Clearly, ‘Pension Wise’ has a massive job to do in developing communication channels in these areas and providing an offering which delivers as much relevant information as possible to those in this situation. However, concerns have again been raised about the remit of the guidance to be given and whether all potential impacts are going to be discussed. After all, if guidance is just a simple and rather cursory run-down of ‘options’ then it will potentially be leading individuals down a dangerous road – perhaps none so dangerous as the impact that could be felt on their benefits.
If you were in any doubt about the potential minefield that many pensioners could be entering in six weeks’ time then I would urge you to read Gareth Morgan’s most recent blog, available at http://blog.cix.co.uk/gmorgan/.
As many equity release advisers will know, Gareth is MD at Ferret Information Systems and has been blinding attendees at our road shows and roundtable events over the years with his benefits science. Ferret also offer one of the benefits systems which can help advisers determine what benefits an individual is entitled to, what they are currently claiming, and what they are not – clearly these can all be impacted by a decision to take out an equity release product and this will also be the case depending on what options they choose for their pension.
In this most recent blog, Gareth gives a step by step account of the potential benefits issues that could be raised post-April depending on the decision taken. A poor choice could leave the individual seriously out of pocket and again, there is a real danger here that pensioners could leave ‘Pensions Wise’ with the wrong impression about what the overall impact might be.
The whole issue of benefits is complicated to say the least, which is why we have been telling equity release advisers for many years to make sure they cover off a client’s benefits entitlements during their factfind work. It seems to me that the powers that be at Pensions Wise should be doing exactly the same, and certainly anyone operating in the later life advice space who wants to provide certainty – and cover their own back – without doubt needs to be using a Ferret or Ferret-esque system because there are hidden dangers everywhere.
I suspect that the closer and closer we get to April the more issues will be highlighted but, as always, advisers must ensure they are looking at the client in the whole rather than just around the potential product need. The retirement income sector is about to get rather more complicated and the knock-on impact of a decision made now could have huge ramifications for many years to come – for client and adviser. Let’s ensure we do all we can to provide peace of mind for that client and ultimately for the advice that is provided.