Why advisers need a holistic approach to retirement planning

A transformation in the pension environment has been long promised, and now it seems many key changes are in the process of being delivered.

In addition, the Dilnot Commission’s report has highlighted how important it will be to integrate both the approach to long-term care and provision for pensions.

The likely outcome of the various consultations, white papers and ultimately, legislation, is that individuals will be encouraged and, where necessary, required to take more personal responsibility for their long-term needs, including pensions, long term care and protection.

The default retirement age has already been abolished, while the age at which the state pension can be claimed is to move upwards at an accelerated pace for both men and women.

Abolishing the compulsory annuity rule is also likely to bring changes in the way clients and advisers approach the funding of retirement and care in the direction of personal responsibility.

Increased flexibility

Retirees will in future have greater choice: they will be able to take their fund either as a lump sum, subject to a capped limit, or as a drawdown income, as long as minimum income requirements are met.

While the new pensions environment will offer a greater degree of flexibility to those addressing retirement needs, there will clearly be a need for advisers to be ready to offer broad, comprehensive advice.

The hope is that those discouraged from saving for a pension by a lack of control over their pot and the perceived poor value of many annuities, will decide to contribute to a pension plan.

There is a consensus that a flat rate state pension rate, currently at the consultation stage, is a move in the right direction and will encourage more saving.

It will certainly focus the minds of both advisers and clients on the limits of what the state will provide, and offer opportunities to invest for a future where the forward-thinking will not have to worry about their funds being partially clawed back under means-testing.