Our next question asked about compliance and whether advisers found it restrictive when planning clients’ retirements (Chart 6). Almost two thirds said they had found some restriction directly as a result of compliance issues, but only 18 per cent said they had found it “very restrictive”.
Next, we looked at so-called pound cost ravaging (Chart 7) – the impact of underlying market at outset on drawdown that was highlighted in Abraham Okusanya’s recent report. Interestingly the idea has gained traction, with 85 per cent saying they did consider it. Despite the phrase only being coined in May, just 5 per cent said they had never heard of ‘pound cost ravaging’.
When asked how the market had changed already (Chart 8), the majority identified a drop in annuity business, roughly evenly split between that fall being offset by an increase in drawdown, and those who saw other products filling the hole left by annuities.
However, despite the fanfare headlines about the new landscape, a not insignificant 23 per cent said they had seen no difference.
The faith in annuities was further endorsed by the next question (Chart 9) where only 7 per cent believed annuities to be finished. And almost half (47 per cent) said they could still provide for an entire retirement.
Question 10 again undermined some misleading headlines, this time regarding irresponsible pensioners rushing to access their entire pot (Chart 10). When asked how many clients had encashed their entire pot, over half (57 per cent) said none had, while 38 per cent said fewer than one in 10.
According to Brian Evans, of Glasgow-based Independent Financial Advice Centre, there has been a n increase in the number of consumers looking to access pots, although maybe this is curtailed for the advised community by their advisers. “People at the lower end of earnings are trying to take pensions when they will need the money in later life. We try to deter them usually to no avail,” he says.
In terms of a potential solution, Mr Evans proposes taking back some the freedoms, “flexibility is needed but perhaps once your fund is below £50,000 there should be a maximum draw to keep some for later life.”
Overall, the key findings of our survey were that there is as yet, no consensus. Despite the freedoms having been with us for six months now, there is little certainty as to how the market will look, or what constitutes best practice within it.
