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Pensions freedom: why the market now needs to look ahead

Pensions freedom: what’s not to like?


The ability to maximise your retirement income by investing in other products apart from boring old annuities… the chance to cash in part of your savings and enjoy that trip down Route 66 you’ve always promised yourself… and, of course, the opportunity to pay down some of the expensive debts many of us in our 50s and 60s have built up over the years.


The fly in the proverbial ointment is that the market isn’t ready. Nowhere near ready. Very few new products. Many are unable to even let people do their cashing in (or, if they are, are charging hefty premiums for the privilege).


The best most can do is increasing manning on their telephones to handle the enquiries. No word yet from how the brave 300 taken on by Pension Wise are coping, but as they really only have to advise people not to make hasty decisions, calls to them might be quite short.


The main concern I have is that there are big numbers of people keen to get their mitts on their cash – not least to pay down expensive debts - and plenty of unscrupulous people happy to show them how to do that. The fraudsters have, we’re told, the pension details of hundreds of thousands of people, so stand by for media tales of those who get sold short.


Don’t get me wrong. Pensions freedom is a fantastic, well overdue idea. And I’m not castigating the financial services providers for not being able to come up with ready-made solutions in the meagre 12 months they were given when the Chancellor dropped his Budget bombshell, targeted to explode just a few weeks before a General Election.


However, the least they could have done was to put in holding letters to their customers. We ran a survey amongst 1,500 of our subscribers: just 46% had received any missive from their providers. 


To me that’s not just remiss but potentially foolhardy. The same survey revealed that 28% plan to take some of their pension benefits early. Of those, 29% were thinking of moving money between one and two years early, 38% between three and four years ahead of time, and 33% will be digging into their pot five or more years early. Some 8% are considering taking out all their pension pot, regardless of the tax implications


If those figures came to pass, that’s billions being moved out of pension funds over the next few years – a seismic shift in assets.


Wouldn’t it be nice for the market to think of the long term, bigger picture of a society that is going to carry on ageing, and come up with a new way of looking at how we fund our later years. The old cliff edge retirement has long gone.  Some of us will be working until our 70s and beyond, or dropping in and out of work between caring for elderly relatives. Many of us will not have enough to get by in later life, but will have a tidy sum locked up in our homes.


We need new, flexible products that meld mortgages, life assurance, pensions savings, drawdown when we need it, provision for care, equity release… just one pot that we save into and draw out of during our life.


It would need to be Government backed for security, but the same Government would know that person would be less likely to call on their help in the future. I think they might be persuaded.



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