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RETIREMENT SAVERS ‘FORCED TO TAKE RISKS’ AS GUARANTEED INCOME CHOICES SHRINK

  • Nearly half (45%) of retirement savers fear they have to take more risk because of a lack of choice for guaranteed income solutions for life
  • More than two-thirds (67%) of advisers are concerned about the lack of choice for clients who want lifetime guaranteed income
  • MetLife report Guaranteeing Real Pension Freedom urges industry to clarify the specific options available at retirement to help prevent savers taking unnecessary risks 

A new report from MetLife is calling for guarantees and guaranteed drawdown to form a central part of the Government’s new guidance framework to help prevent the unnecessary risks people are taking with their savings at retirement because they don’t understand the choices they face.

The report, Guaranteeing Real Pension Freedom, available to download at www.metlife.co.uk, highlights independent research* which shows nearly half (45%) of over-40s worry that a lack of guaranteed income choices is driving people to take risks with their money – yet one in five retirement savers (20%) don’t fully understand the choices they face which would help them receive the level of retirement income guarantee they are looking for.

Furthermore, two-thirds (67%) of advisers are concerned about the lack of choice for clients who want lifetime guaranteed income.

The report suggests the Government’s plan to launch a new financial guidance service in place of Pensions Wise and the Pensions Advisory Service provides the ideal opportunity to refocus on explaining all retirement income choices, together with their risks.

The challenge for savers is real – nearly six out of 10 (57%) over-40s worry that low long-term interest rates are making retirement saving more difficult and 52% are concerned about not having income certainty in retirement.

Furthermore, around two out of five fear the annuity rates will continue to fall and damage their retirement income.

Simon Massey, Wealth Management Director at MetLife UK said: “Our research has uncovered a worrying gap in knowledge which has the potential to massively impact the retirement savings of a huge number of people.”

“Despite almost half of savers taking more risk because of a lack of guaranteed income solutions for life, one in five admit they don’t understand the choices they face to generate this retirement income. However, if they were confident, they might see there are ways of obtaining the guarantees they want.”

“We believe retirement conversations need to change to include a wider range of options – anything that encourages this, including guarantees and guaranteed drawdown to form part of the new guidance framework, should be supported across the board.”

New research in the report reveals that around 75% of retirement savers say having a guaranteed level of income in retirement and flexibility is important. Around 26% want all their retirement income guaranteed for life. They are supported by advisers who believe clients should have at least 37% of their income guaranteed. And advisers themselves want at least 32% of their own retirement income guaranteed for life

The report covers four specific sections. The first section sets the scene by analysing the storm that is gathering around pension freedoms.  The second section moves on to examine the current status of drawdown options. The third section highlights the growing need to expand the retirement conversation to include guaranteed options and the final section moves into setting out the case for need for real change to ensure the future success of pension freedoms.

MetLife’s range of retirement and investment solutions have been designed to meet the need for a guaranteed level of income for life in retirement or a guaranteed capital amount at the end of a chosen term, while providing customers with the flexibility to access their investment if needed.

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 with the flexibility to start, stop and restart their income to suit their personal needs.