optionsSo many options...

Nowadays, when a member wishes to access their pension savings, there are a wide range of benefit options available such as cash, drawdown, annuity purchase or a combination of options. Some of these options can be very complex and there is often a need to take financial advice.

Although annuity purchase is often considered a straightforward option, there can still be a need for the member to take financial advice to avoid selecting the wrong type of annuity. The following case, dealt with by our Retirement Services team, highlights this point.

A member of a scheme approached our Retirement Services adviser seeking advice for the best annuity provider to establish an escalating annuity increasing in payment at a rate of 3% per annum. A key role of an adviser is to ensure what the member intends to do is right for them although in this case, annuity purchase was appropriate because the member needed a secure income for life. However, the issue was whether a pension which increased at 3% per annum was the right solution.

The member was in their mid-60s and the most competitive quotation obtained, based on the value of the member’s pension savings, quoted a starting pension of £830 p.a. escalating at 3% annually, or a fixed pension of £1,180 p.a. Our advice was to buy the fixed pension for the following reasons:

  • It would take 13 years before the escalating pension increased above £1,180 p.a.

  • 23 years would need to elapse before total payments from the escalating pension increased above the total payments from the fixed pension.

  • Current life expectancy for those aged 65 is 18.6 years for males and 20.90 years for females.* *source: ONS National Life tables, UK 2015/17, issued 28.09.2018

  • Enhanced annuity terms had been obtained due to the member’s medical history. Those conditions may have an impact on life expectancy.

There is normally a charge for advice, but this can usually be paid through an agreed adviser charge taken from the plan value or commission factored into the annuity rate. As in the above case, this can represent good value to avoid the member making a poor decision. Lots of generic retirement guidance is currently available, but individuals often need financial advice.

Want to find out more?
Download our guide to At-Retirement Services:

straightforward-retirement-web

Active members of a workplace pension scheme are often sheltered from having to make decisions regarding their pension savings. Most tend to have their savings invested in default investment strategies which are usually well governed.

However, this changes when the member wishes to take benefits.

Faced with the range of benefit options available, members can feel isolated and unsure on which option to select. Here is where the financial adviser can play an important role in delivering a solution relevant to their needs.

Our Retirement Services advisers can deliver a cost effective service to ensure your members make the rights decision when taking benefits.

Contact our team to find out more about the services we can provide in this important area.

 

Posted by Richard Guy

Topics: Retirement, Pensions

Premium-content-centre-aspire
Questions

Ask The Experts

Want to get in touch?
Just fill out the form below and we will be in touch shortly.

rocket

NEXT GENERATION SAVINGS

Changing Workplace Savings Behaviour for the Better

discover
bullseye

Master Trust

The Aspire Savings Trust is a multi-employer, occupational pension scheme. It brings together governance, investment, administration and communications expertise within a technology-led solution.

more
governance

Governance

Establishing and governing the ideal workplace pensions and savings for your employees can be complex and time consuming. That’s where we come in.

Monitor
speech

Engagement & Education

We use innovative communication channels and modern technologies to help educate, engage and inspire employees across a range of financial topics.

 

Find out more
retirement

Retirement

With greater choice and freedom in how and when individuals are able to access their pension fund, there is now an even greater need for early education and advanced planning. Find out how we help.

Discover
graph

Investment

Our investment research division analyses and rates over 18,000 DC investment funds. The insight we have enables us to support your investment objectives, making sure they're on track to deliver.

track
people4

Health & Risk

Our health & risk service provides tailored combinations of cover and cost to exactly match each employer's requirements, helping you get best value for your benefits spend.

Assess