Budget 2014 pension changes give consumers more choice, but leaves them needing more advice than ever
New research from retirement specialist LV= reveals that three quarters (72%) of advisers say that clients have started to request products that offer them a guaranteed income and future flexibility since the Budget, with many considering a combination of retirement income products.
The findings indicate that as consumers are becoming more aware of the alternatives to standard lifetime annuities they are opting for more flexible retirement income options including fixed term annuities. More than four in five (88%) advisers stated that they are seeing an increase in client demand for drawdown solutions.
One of the most significant changes announced in the Budget was the ability for all retirees to access the entirety of their pension from April 2015. More than three quarters (80%) of advisers have clients who have expressed interest in taking their retirement savings as a lump sum. However it is clear that many are not aware of the potential tax implications of taking their pension savings in this way. Indeed, over half (51%) of advisers stated that clients were not aware that taking their pension savings as a lump sum could potentially mean they have to pay a higher rate of tax.
Most retirees will need help navigating the new retirement income landscape, but adviser opinion is divided over the government’s promise of free retirement guidance. When asked about what effect the government’s guidance guarantee will have, more than a third (38%) believe that it could increase the amount of business they get as those approaching retirement will be encouraged to seek regulated advice. However more than a third (35%) don’t believe the guidance will have any impact at all.
Those advisers that are optimistic about the changes believe that the Budget has created a positive opportunity for their industry as retirees are going to require more help, advice and ongoing support.
Philip Brown, LV= Head of Retirement Proposition, said: “Our research gives us insight into how those approaching retirement have responded to the Chancellor’s Budget. The changes are already having a dramatic impact on the retirement industry and we are likely to see further product innovation once all the reforms are implemented in April 2015.
“Those approaching retirement now have even more choice as to how to take their pension savings, but it is clear that there remains an air of confusion amongst clients as to what the changes mean. It is particularly interesting to see that clients are increasingly interested in mixing and matching products. Many retirees may not be aware that this is a possibility and this is one of the many areas in which advisers can truly demonstrate the value of at retirement advice.
“We believe it is essential that guidance leads to good consumer outcomes and, where appropriate, encourages individuals to take regulated advice. In many circumstances regulated advice will prove to be more beneficial and lead to better outcomes for retirees.”