Richard Porter, IFA St Albans - FCA interim findings of retirement income market

Friday 20 October, 2017

FCA - Interim findings of retirement income market

The FCA recently published interim findings of a study into the retirement income market.  The review found that:

Almost three quarters (72%) of pension pots have been accessed by consumers under 65, and most are choosing to take lump sums rather than regular income.

Over half the pension pots (53%) have been fully withdrawn.  Although of these that have been fully withdrawn most are small and 90% are below £30,000.

Drawdown has become more popular.  Twice as many pension pots are moving into drawdown than annuities.

These are still only interim findings but the review identified five key issues:

• 52% of fully withdrawn pots were moved into other savings or investments and were not spent. 

• Consumers who access their pots early are generally accepting drawdown from a current pension provider without checking for alternatives.

• Consumers are increasingly accessing drawdown and are not taking financial advice. Before the freedoms & choice legislation, 5% of drawdown was bought without advice compared to 30% now. Drawdown is complex and these consumers may need more support and protection.

• Providers are withdrawing from the open annuity market which could bring a risk of weakened competition in future.

• Product innovation has been limited to date, particularly for the mass market.

Richard Porter, independent financial adviser and member of St Albans financial planning team said:

‘The FCA is looking for feedback on these initial findings and will publish a final report in the first half of 2018.  Already a clear pattern is emerging that some consumers are not taking financial advice over their retirement planning.  The FCA is looking at whether additional protections should be put in place for consumers who buy drawdown without pension advice. We would always recommend that anyone coming up to retirement gets independent financial planning advice.  The FCA findings show that over half withdrawn pension pots were moved into other savings and investments.  Unless consumers get independent financial advice this decision could result in consumers paying too much tax, and missing out on investment growth or losing out on other benefits.  We recommend anyone coming up to retirement reads our Retirement Options brochure - Freedom & Choice in pensions, before, at and in retirement or review our Retirement Guide.’

For more information read: Daniel Stansall, independent financial adviser Barnet – Managing your income in retirement, Simon Hawker, independent financial adviser St Albans: Understanding your retirement options, Richard Porter independent financial adviser St Albans: Generating tax efficient retirement income, Simon Hawker independent financial adviser St Albans: When does it pay to seek independent financial advice.

Please note: The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest. 

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