Primetime Retirement, a fixed-term retirement income provider, is calling on advisers to present the full range of pension options available to customers and ensure they are advising their clients every step of the way.
Despite the success of industry campaigns like ‘Offer More Options’ and the changes in legislation that have resulted from them – the removal of the Age 75 rule and, more recently, pension freedoms – Primetime Retirement believes many retirees could still potentially end up with the wrong retirement income solution.
Previously the main concern was customers locking themselves into a lifetime annuity too early in retirement but this has now been replaced by retirees chasing yield through the purchase of investment-backed assets, leaving themselves exposed to an unacceptably high risk of losing part of their fund
Although the pension freedoms have been a step in the right direction, it is only the next chapter in the ongoing campaign to improve customer outcomes in retirement, the firm says. The pensions landscape is now more confusing than ever for retirees, who now have the option to cash in their pension fund, take out an annuity, enter flexi drawdown or opt for an uncrystallised funds pension lump sum (UFPLS).
Primetime says this could lead to retirees opting for a pension product or an income ‘shape’ that is not suitable for their needs. For example, consumers can now pass on pension funds as an inheritance to anyone, not just family members, so advisers now potentially have to deal with a new approach to inheritance planning.
Kim Lerche-Thomsen, founder and CEO of Primetime Retirement, says: “For many people, retirement – and their choice of how to fund it – is the biggest decision of their lives. Whilst the introduction of the pension freedoms has led to a lower take up of lifetime annuities, it has been replaced by a much greater take up of risky investment-backed assets by clients who either haven’t considered or been offered safer, less risky alternatives.
“There are now a wide variety of options for retirees choosing a pension, which means that they will need to be guided through the new landscape by advisers. Many retirees are finding themselves taking significant investment risk when they reach retirement without being made aware of the safer, investment risk free alternatives on offer. It is imperative that advisers and more importantly retirees are aware of the options available to them on the market.
“Advice is key to a better financial outcome in retirement and we want all advisers to urge their clients to view the full range of options available and to think carefully before making that all important final decision. This expert advice will be essential to helping retirees make the right choice for their future.”