Time to prepare for ‘pension freedom’
I have believed for some time that greater flexibility and simplicity are needed in the pensions market. The government’s changes are certainly a step in the right direction. Savers should have the freedom to choose how to access their money. This increases the incentive to save for retirement and will go some way to restoring consumer confidence that has been lost. The news that Britons can now pass on their savings, tax-free, to beneficiaries on death before aged 75, without being subject to a 55 per cent tax, supports this.
Income drawdown plans can provide the flexibility that consumers need in terms of when they access their money, and how much they take at each stage of retirement. The removal of the ‘death tax’ will also place income drawdown at a significant tax advantage over annuities, which are not value-protected, and over occupational pensions.
However, with freedom comes greater choice and in the months ahead, we expect to see an increase in people accessing financial advice as they approach retirement and assess their options. Advisers will have a crucial role in navigating their clients through the changes and identifying the best options for them.
As a result, in the months leading up to April 2015, advisers will be looking to arm themselves with the products to meet this new demand. But what will be their priorities?