Moret says advisers need to boost knowledge

22 July 2010 | By Nicole Blackmore

Advisers and investment managers lack knowledge of the risks associated with drawdown and will have to raise their game in time for the Government’s new regime, warns Suffolk Life.

Last week, Treasury financial secretary Mark Hoban revealed proposals to scrap compulsory annuitisation and replace alternatively secured pensions with capped and flexible drawdown options from April 2011.

Suffolk Life director of marketing John Moret says advisers and investment managers must have a full understanding of the investment, inflationary and longevity risks of drawdown.

He says: “Experience over the last 15 years with the different and increasingly complex drawdown regimes has shown a worryingly low level of knowledge around the mitigation of risk and too much focus on simple criteria, such as critical yields and deterministic investment returns.

“Managing the different risks associated with income optimisation and capital preservation requires both knowledge and sophisticated technology. At the moment, both are in relatively short supply.

“Advisers will need to raise the bar, particularly if they are also responsible for the investment management of their clients’ funds.”

Prudential UK deputy chief executive Barry O’Dwyer welcomes the plan to scrap Asp in favour of drawdown.

He says: “Asp has failed to make an impact and, in reality, has become one more thing for customers to discount when planning for their retirement. The Government’s proposal to abolish Asps should make the landscape a little clearer for people in retirement by simplifying the options to either buying an annuity or moving into a USP arrangement.”

Hargreaves Lansdown pensions analyst Laith Khalaf says: “These proposals are more radical than we were expecting and they may encourage people who do not have a pension to start saving.”
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