The pension changes will require advisers to juggle risk, which mainly centres on longevity, inflation, volatility and flexibility, when building an at retirement portfolio, according to Stuart Tragheim, sales director at Engage Mutual, and Colette Dunn, head of strategy at Milliman, who spoke at both forums. Mr Tragheim said: “The retirement freedoms that are now avaliable are huge and are game-changing.”
He added: “These are the first changes that I have seen in the past 30 years that are likely to have a huge impact on the demand side, not just for initial advice but ongoing advice, and helping customers managing risk through their retirement.”
Ms Dunn said that with the pension changes, the risk of investments had been shifted from the provider to the individual. Advisers would have to be prepare and be equipped to take on this responsibility when these individuals sought their service.
Mr Webb said that critics of the freedoms claim that those who end up spending the total sum of their pension pot will claim state benefits, but added that that would not be an issue and that the office for budget responsibility agreed.
However, these individuals would be supported by the state pension and could also get help from their local authority to pay their council tax
The new freedoms also posed a problem for people who have already annuitised, according to Mr Webb.
“You annuitised a day before the Budget or six months before the Budget and you are locked in for 30 years, but actually you did not want an income stream, you wanted capital, but that was the only option on the table,” Mr Webb said.
Abolition
He added: “What would be so terrible in allowing people who have got an income stream to assign it to somebody else, a financial institution or somebody, and turn it back into cash?”
However, he admitted the idea was unlikely to be implemented in the near future.
Mr Webb expressed the need for the abolition of the lifetime allowance, describing it as “illiberal” not to encourage wealthier people to save into pensions. However, he admitted this too was unlikely to happen in the near future.
He added: “Once you have a sensible flat-rate system for tax relief you do not need a lifetime allowance. If you have an annual allowance and a sensible rate of relief they you can do away with lifetime allowance, that would be my package.”
Myron Jobson is a features writer of Financial Adviser
