When we relaunched this Association last year we set out a clear and simple goal for our work: to help everyone achieve a better income in retirement.
That doesn’t mean at retirement. It doesn’t mean our work ends when people reach the end of their working lives and start spending their pensions savings. It means throughout retirement.
People need that support since our normal concept of retirement – a single decision to start taking a single source of private retirement income – ended on 6 April 2015 with the introduction of new pensions freedoms and choices.
|Pensions freedoms infographic |
The normal role of the individual changed with it: when you retire you will have to be your own actuary and IFA. And the choices you face will be anything but clear and simple.
A new range of products is needed to help savers with the complicated set of financial decisions they now have to make. But it isn’t there yet. The trustees of your scheme can’t help you. And the Government’s Pension Wise service can only give you generic information. Where do you turn?
Yesterday, we published the latest instalment in our Understanding Retirement research series. The first wave last year revealed the expectations, hopes and fears of savers approaching retirement. Their hope was underlined by broad support for the changes. Their fears were about getting to grips with new products and being ripped off or making bad decisions.
Now the second wave shows how three million people aged 55-70 are using their freedoms and making practical choices in the new era.
We defined three groups:
Actioners – the early adopters, a distinct and affluent group, many with experience of self-invested personal pensions (SIPPs) or income drawdown
Investigators – those who are assessing their options; the largest group, with limited experience of drawdown and limited DC savings but largely reliant on DC and other savings for an income in retirement
Inactives – the most vulnerable group, many still working, and the most reliant on their DC savings to provide an income in retirement – but with the lowest levels of financial confidence
The Investigators and the Inactives are the people we need to learn from and the people we need to help. Pension Wise and financial advice are there for them but aren’t enough – many of them won’t even use these services, but they aren’t capable of managing the risks associated with their new options themselves.
So how do we give them the best support? The answer is signposting. We point them to the products that come with guarantees for simplicity, low-cost administration, an income for life with some flexibility and good governance and communication. And the sign on that signpost should be the Retirement Quality Mark, currently being developed by the board of the Pension Quality Mark.
When I launched our research yesterday, I said there has never before been such a major change in pensions policy introduced with so little thought for how it would affect the people it’s intended to benefit.
We need to start seeing the freedoms from the savers’ perspective, not from the perspective of a Government tearing down the old order or an industry trying to make sense of, or profit from, the aftermath. We must focus on savers’ ability and understanding, what they mean (not what they say in a foreign language we made up for them). And we must start understanding what a good retirement looks like for them – not what we want to deliver for them.
There is no normal for savers anymore. It’s up to us to find the right solutions for them.