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‘Don’t give up on annuities’

Savers have an increased risk exposure due to the greater level of pension flexibility

27 February 2015

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The new pension freedoms have empowered savers but many will still need to buy an annuity to meet their basic living costs.

David Woodhouse, the head of advice services at Chase de Vere, believes that the new freedoms might encourage savers to take risks that they cannot afford to take.

"We are very nervous about people who don't have adequate levels of secure income… accessing the new pension flexibilities and taking additional risks that they simply cannot afford to take. They could be gambling with their and their family's future standard of living.

Since the government's pension reforms there has been a lot of concern about the prospect of savers withdrawing too much money from their pension pots and neglecting the cost of their living needs.

Woodhouse added: "We strongly believe that everybody should have secure income to meet their basic living costs in retirement. This will typically come from a combination of the state pension, defined benefit pensions and if there is a shortfall, from buying a lifetime annuity with some of their other pension funds."

"An annuity won't be the best option for everybody, but for many people it will be the right choice for at least part of their pension pot to ensure they have enough secure income in retirement. Beyond this they can take advantage of the new freedoms if they want, safe in the knowledge that at least their basic standard of living is protected."

Cooling off period

Meanwhile Kay Ingram, director of individual savings and investments at LEBC group, has said that the government should introduce a 30 day cooling off period for anyone who wants to access all of their pension pot, unless they have been advised by a regulated independent financial adviser.

He said: "Taking guidance only could lead to irrevocable decisions being made about a lifetime of retirement savings with no redress or compensation as guidance is not regulated, nor indemnified and is being delivered by unqualified and inexperienced staff.

"A safeguard needs to be put in place to protect the public from making the wrong decisions when accessing pensions without consumer redress."


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