While the release of a report by the Financial Services Consumer Panel (FSCP) should continue to raise the issues surrounding excessive commission and fees charged for non-advised annuities, investment business Skandia believes that it does not go far enough in considering consumers’ needs as they approach retirement.
An annuity is just one option available to a consumer when they are assessing their income needs in retirement, and it is important that the public understands that as soon as possible.
Adrian Walker, Skandia's retirement planning managerAdrian Walker, retirement planning manager at Skandia, comments: “The FSCP report has done a great job at heightening the sense of fear the public has when considering how to provide retirement income from their pension savings.
“It should be remembered that, in the right situation, at the right time, the right annuity product will still be a sensible choice for the consumer. The main reason the report contributes to the fear factor is that it doesn’t go far enough. It does not consider the need to make consumers aware of their alternatives, which will further cement the public’s belief that their pensions equal ‘rip-off’ annuities and vice versa.
“It will be very important, if any of the proposals outlined in this report are to be taken forward, that the proposed code of conduct includes clear information about non-annuity options as a high priority.
“Such information needs to explore other courses of action that a person can take to delay the decision to buy an annuity, including continuing to work, using their pension savings initially to provide income through a capped drawdown facility, or using other savings, such as ISAs to provide part, or all of their immediate income needs.
“We agree that the path to purchasing the right annuity should be controlled and the associated costs transparently disclosed, but firmly believe that across all ‘at retirement’ communications there should be a clear message that buying an annuity is not the only course of action. How to turn their pension savings into retirement income is one of the most important financial decisions a person has to make. Scaring consumers at a point in their lives when they need sensible, good quality financial advice, or provision of clear and understandable educational information to allow them to make the right decision, is not the way to go about it.”
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