I was awaiting the recent Pre Budget Report with interest, to see whether Chancellor Alistair Darling would 'do the right thing' by people in and approaching retirement. It was certainly a mixed bag for the group of people that we have termed 'FREDs' - people who Face Retirement Earnings Doubts.
The announced rises in the state pension and pension credit will greatly assist those pensioners who have struggled against the backdrop of rising utility bills and food prices this year. Our own LV= State of Retirement Report earlier this year revealed that people approaching retirement are aware of the significant gap between the income they need to maintain their standard of living in retirement, and what they will actually have. Those surveyed said they would need £20,100 a year in retirement, but believed they would actually have only £16,900 a year. This move by the Government goes some way towards bridging that gap.
However, I am disappointed that the Government did not take the opportunity to review the inflexible Age 75 rule. Currently, the Government insists that customers must crystallise their pension benefits, take their tax-free cash and withdraw a 'secure' income by their 75th birthday. Given the restrictions placed on alternatively secured pensions (ASP), this generally means the purchase of an annuity.
Not only does this perception of compulsion put some people off saving into their pension, it also forces people into decisions that may not be in their best interests. In an environment where there are fundamental demographic shifts and increasing longevity, as well as the current economic problems, it was hoped that the Government would relax their position, allowing people to defer making a decision that will affect their income for the rest of their lives.
Retirement means different things to each individual. People have differing needs and aspirations, and therefore need to have access to advice, support and information, within a flexible framework, to allow them to make decisions on what is best for them in their retirement.
As a New Year's resolution, it would be great to see the Government working with the industry to understand what people in and approaching retirement need, instead of tinkering with policies and rules. Consumers need to be at the heart of this process, and this means a wholesale review of the restrictions placed on customers at age 75.
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till