Expert: Lesley Whyte, Head of Strategic Partnerships, Standard Life Facilitator: John Lappin, Consultant
Headlines:
- Balancing clients' desire for guaranteed income with the need for flexibility remains a central challenge, particularly given recent concerns over potential tax-free cash restrictions
- Rising interest in annuities sparks a discussion on the need for product innovation and rebranding to improve their appeal and accessibility
- Pension freedoms offer flexibility but have led to unintended consequences, such as clients treating pensions as inheritance tools rather than income sources
- Addressing client vulnerability remains complex, with varying opinions on regulatory expectations and the practicalities of assessing vulnerability in clients
- Calls for innovative products, digital guidance, and pension consolidation before retirement highlight paths to improve accessibility and planning efficiency
Discussion points:
Guaranteed income vs. flexible drawdown
Clients often want both security through guaranteed income and the flexibility of drawdown, creating a need for adaptable solutions.
Many clients are currently eager to access their tax-free cash due to fears of future restrictions, causing advisers to encourage a focus on long-term planning rather than short-term speculation.
Evolving role of annuities
Higher interest rates make annuities more appealing, but challenges around negative perceptions and pricing persist.
Ideas included rebranding annuities as "guaranteed income" and exploring options like deferred annuities to meet diverse client needs.
Impact of pension freedoms and client behaviour
Introduced to offer flexibility, pension freedoms have led some clients to view pensions as inheritance tax tools rather than for retirement income.
Guidance is critical to help clients navigate complex decisions, avoid impulsive cash-outs, and understand long-term impacts.
Client vulnerability and regulatory considerations
Identifying and addressing client vulnerability remains challenging, with advisers expressing frustrations about regulatory expectations.
The Retirement Income Advice Thematic Review highlighted issues in advice practices, while the FCA's upcoming Retirement Income Advice Assessment Tool (RIAAT) aims to clarify regulatory expectations.
Innovation, digital guidance, and consolidation
Calls for innovation included blending guaranteed income and flexible drawdown products, as well as digital tools to assist those without access to full financial advice.
Simplifying retirement planning through pension consolidation before retirement was suggested to help clients make informed decisions.
Key takeaways:
- Explore ways to improve the appeal of annuities, including rebranding efforts and introducing flexible products like deferred annuities
- Develop resources to educate clients on the trade-offs between guaranteed income and flexible drawdown and support informed decision-making about tax-free cash
- Advisers should consider encouraging clients to consolidate pensions before retirement for simplified decision-making and improved planning
- Bridge the advice gap with digital tools and hybrid advice models, providing accessible guidance for clients who cannot afford full financial advice
- Seek regulatory clarification to better address client vulnerability assessments and establish clearer expectations for the retirement advice process
- Consider new products that blend guaranteed income and flexible drawdown to address the security-flexibility divide and better serve client needs
