Darren Dicks discusses how the RDR will affect the provision of retirement advice as well as going through the options available to those retiring in debt.
1. How will RDR affect the provision of retirement advice?
The impact of RDR is still unclear and there are many different views. Aviva are sponsoring the money marketing retirement invitationals in June and presenting our views on how it will change the provision of advice. Please look out for the dates near you.
In short, the key change for retirement advice is customer segmentation and a clear understanding of the cost to serve a client on a non-advised and an advised basis. It's clear that annuities can be sold on a non-advised basis and for many people with small funds an annuity is the most appropriate option, therefore we're likely to see an increase in non-advised annuity sales for smaller pension funds.
For larger funds (above £100K) it is more likely that it would be in the customers interest to take advice. The key unknown is the mass affluent segment with pots between £50K-£100K. We believe that transactional advice on an annuity or fixed term plan could be provided economically for these customers which means advice may not only be provided for high net worth individuals.
2. What options are available to those retiring in debt?
The options for people retiring with debt depends on why the debt accrued.
If it's due to excess consumption then the problem will still exist post-retirement unless the consumption is reduced. If it's due to outstanding mortgages then we are increasingly seeing customers turn to equity release.
People can seek advice from an IFA or debt management company to help them find the best option for them to manage debt in retirement.
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Avoidance, evasion and non-compliance
From 6 April 2019