In March, the Chancellor announced some dramatic changes to the rules on how people can access their pension pots from defined contribution schemes in his budget. Age UK has just submitted its response to the Government’s formal consultation.
From April next year people will no longer have to buy an annuity (an insurance product that guarantees to pay an income for life) but can take their entire pension pot in cash, if they prefer. Many people will welcome this move and Age UK has been arguing, for some time now, that the annuity market is badly in need of reform.
But it does make the decisions as to what to do with your pension savings more complicated than before. To help people navigate around this increased choice, the Government is proposing that people are offered some guidance to help them make their decisions.
HOLISTIC ADVICE IS NEEDED
In our response to the Government proposals, we have argued that whilst we welcome the provision of a guidance guarantee, for it to really work for older people it must be impartial, meet clear quality standards and enable people to manage their savings safely and stay financially resilient over the whole of their retirement, not just at outset.
We know that what older people need in order to successfully navigate later life is holistic advice that takes into account their entire circumstances – pensions guidance simply can’t exist in a vacuum. Beyond April 2015, we also think that the Government needs to ensure that the ‘guidance guarantee’ continues to develop and evolve to ensure it is supporting people throughout later life, not just at the point of retirement.
We know that not many people actively seek out the information and guidance that is already available, so we also argue that there need to be good ‘defaults’ for people who don’t take up the offer of guidance.
AGE UK’S FINANCIAL SERVICES COMMISSION
We’ve been doing a lot of thinking recently about what older people need to stay financially resilient in later life, while we have been running a Financial Services Commission, co-chaired by Tom Wright of Age UK and Dr Alexander Scott of the Chartered Insurance Institute. One of the areas that the Commission has considered is how we can join up guidance for people in later life and enable them to navigate their way resiliently through later life, however complex and difficult the decisions they need to make might be.
We will be launching our findings on this and how else we think the financial resilience of older people can be improved next week. Stay posted!