There has been much debate about how to address this and the Pensions and Lifetime Savings Association has recently suggested setting national retirement income targets. We believe these could be effective in encouraging people to save more, if they are taken forward.
We also believe that more needs to be done to promote the value of advice generally – for both men and women. At present, no government department or body has this within its remit, but the benefits of taking advice are clear.
Advice minimises the risk of someone being scammed, ensures clients understand all the options available, and encourages people to shop around to ensure they get the best value solution for them.
Independent research carried out by the Pensions Policy Institute for LV= revealed that in 2016 around 30,000 retirees could have got an average of £4,000 more over the course of their retirement by switching annuity provider. Yet 71 per cent of men and 65 per cent of women plan to stick with their current provider when they retire.
We know, however, there will always be some people who choose not to take advice, or perhaps for whom advice actually wouldn’t represent good value because their pension pot is too small.
With women having less saved than men, this is likely to be more common with female clients. It’s vital these people aren’t left behind, lacking the support they need to make the right decisions. Indeed, the Office for National Statistics’ Wealth and Assets Survey 2012-2014 showed that 41 per cent of women say they don’t understand enough to make decisions about retirement saving, while 27 per cent of men say the same.
The new Single Financial Guidance Body will be a key source of support for those who can’t or don’t take advice and we believe that impartial guidance should be the default option for anyone not taking advice at retirement.
The recent news that an amendment to the Financial Guidance and Claims Bill - which could have made default guidance a reality - has been watered down is disappointing. We echo Baroness Altmann’s plea for MPs to reject this move as otherwise there is a risk that guidance would be offered by providers - who have a vested interest in selling a product - rather than an impartial body.
The use of technology
Technology also has a key role to play in increasing contributions and engagement in pensions. In particular, the pensions dashboard, as it should make it far easier for people to understand their financial situation and, potentially, encourage them to save more. However, we believe the dashboard could also help increase the take up, and affordability, of advice.
