LACK OF GUARANTEED INCOME CHOICE ‘HITS PENSION FREEDOM SUCCESS’

  • 72% of advisers expect annuity rates to continue to plummet
  • Three out of four believe Brexit increases drawdown risk
  • Savers in run-up to retirement need to guarantee capital and income

Annuity rate cuts and record all-time low interest rates are risking the success of pension freedoms by limiting choices of guaranteed retirement income solutions and pushing savers to unprotected drawdown, MetLife believes.

Advisers expect annuity rates will fall further as providers pull out of the market while stock market volatility will increase the risks of drawdown as the UK prepares to negotiate its exit from the European Union, MetLife research shows.

Around 72% of advisers* believe annuity income – which has already fallen 6.3%** after the EU Leave vote – will continue to slide,  while 73% are concerned about the impact of investment market volatility on drawdown as a result of Brexit.

Most at risk are savers who are five years from retirement – more than a quarter of advisers (27%) are recommending they need guarantees to protect their funds. That is being reflected in rising sales of guaranteed retirement income solutions*** which are building on a 17% increase in the first three months of this year.

MetLife believes that Pensions and Lifetime Savings Association research**** showing 53% of savers considering drawdown think it guarantees an income for life highlights the need for advisers to focus on flexible guaranteed drawdown solutions as an alternative.

Choices of guaranteed options are narrowing with the number of annuity providers falling to an all-time low of 11** underlining the case for solutions such as MetLife’s Retirement Portfolio offering a guaranteed income for life.

Simon Massey, Wealth Management Director at MetLife UK said: “Lack of consumer choice and understanding is a real threat to the success of pension freedoms as savers who want guaranteed income are being driven into traditional drawdown without understanding the risks.

“Pension freedoms have been a major success story so far but there needs to be more innovation to provide a wider choice of options to ensure savers can benefit from flexibility while retaining certainty over their income. One thing is certain – with today’s low interest rates and ongoing investment market volatility, the need for a guaranteed income has never been more important.”

MetLife’s range of retirement and investment solutions have been designed to address the need for a guaranteed level of income for life in retirement or a guaranteed capital amount at the end of a chosen term.

MetLife’s Retirement Portfolio, which was designed for pension freedoms, and its stocks and shares ISA Portfolio provide a choice of income and capital guarantees.

Customers can choose from a range of investments to build a personalised plan suited to the levels of risk they are willing to take, while having the choice of a valuable guaranteed level of income for life from age 55 or a guaranteed capital sum at the end of their chosen term.

In addition, the plans offer the potential for client’s to increase the value of their guarantee through daily lock-ins of investment gains while enabling savers to start, stop and restart their income to suit their personal needs.

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