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Advisers back annuities amid fears over lack of guaranteed income options

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Advisers have defended the amount of choice available in the guaranteed income market following claims limited product choice was causing retirees to take more risks.

MetLife released the results of a poll of 107 retirement specialist advisers last week.

Two-thirds said they were concerned about the lack of choice for clients who wanted lifetime guaranteed income.

However, some advisers argue guaranteed income can be planned for with the current set of products on the market without having to use guaranteed drawdown or the hybrid products being offered.

Yvonne Goodwin Wealth Management managing director Yvonne Goodwin says: “We have to look at those options because they are there, but the guarantees are quite expensive.

“You are better off just organising yourself through a bit of drawdown or a bit of annuity.

“Unless you buy an actual annuity, these third-way products still have risk elements, it would be wrong to identify them to a client as guaranteed.

“Some products come and go out of that market like nobody’s business. A guarantee is only as good as the person offering the guarantee so you need to be very wary.”

Research from consultancy The Lang Cat last year suggested advisers were dismissing guaranteed drawdown options too often, fearing they were too expensive.

Penguin Wealth managing director Craig Palfrey says choice is not the issue when arranging guaranteed income for his clients, who can benefit from a phased mix of annuity and drawdown.

Palfrey says: “There’s plenty of innovation and availability, plenty of ways to get people a low risk income. The challenge is the press and the Government seem to have told everyone they want drawdown.

“The problem is with public perception, no matter what we do as advisers. You would be mad to buy an annuity, that’s what the man on the street says. The euphoria over pension freedoms, drawdown and its impact on guarantees is going to last forever.”

FCA research shows a 16 percentage point drop in consumers’ appetite for guaranteed income when the word “annuity” is used.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I don’t think there is lack of choice e.g. lifetime annuities, fixed-term, Retirement Advantage’s combination plan, unit-linked guarantees and some structured investment products.

    However there is lack of understanding because we don’t need more products we need more advice, especially to fill the advice gap.

    One of my clients said “Billy, give me a one handed adviser because you keep saying on the one hand an annuity, on the other hand drawdown”.

    Clients do need a two handed adviser, but the problem is many are still one handed and the non-advice firms have one hand tied behind their back.

  2. In other news, Birdseye said people want more fish fingers and Budweiser said people want more beer. I’d take these self-promoting ‘polls’ with a pinch of salt.

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