If you want to know how to retire in style, go to Monte Carlo. However, the average pension fund in the UK would barely produce enough income to rent an apartment for a week so it was surreal discussing the future of the retirement income market in the richest principality in the world.
In my mind, there were two main themes to the annual Money Marketing Retirement Planning Summit held last week regulation and legislation.
One of the hottest topics was the impact of RDR on the retirement market and delegates were divided between those who thought RDR would benefit those IFAs who have the confidence to change their business models to encompass a fee-paying proposition and those who thought the unintended consequences of RDR would result in a large group of customers who currently get advice not getting that advice in the future. It is no secret which group I identify with and I will return to this topic in future articles.
Turning to legislation, the recent changes around abolishing the effective compulsion to purchase at age 75 has raised some important planning opportunities. First, Sipp providers Hornbuckle Mit-chell and James Hay made some interesting points around the use of scheme pension and flexible pension. With the reduction in the maximum income for drawdown, pensioners can potentially take a higher income from a scheme pension.
There was also widespread agreement that those who can apply for flexible drawdown should do at the earliest opportunity, perhaps when the state pension commences, to benefit from the new flexibility. This may not necessarily be in order to have large income payments but to have the flexibility if needed. More than one firm mentioned that phased retirement was back in fashion following the increa-ses in the tax to lump-sum death benefits to 55 per cent.
Annuities were also widely discussed, with Axa and Met Life providing persuasive reasons why variable annuities should be considered as an option that spans the gap between guaranteed annuities and drawdown.
MGM confirmed their credentials as a product innovator by discussing plans for a new simplified drawdown.
I came away from the summit with a feeling that after all the uncertainty of the credit crunch and recent regulatory and legislation overload, the retirement income market has bounced back with renewed confid-ence and optimism. Now that is something worth writing home about. ’I came away from the summit with a feeling that the retire-ment income market has bounced back’