This might be an argument against defaulting people into “guided retirement” – aka flex and fit.
Except there really isn’t any problem getting a payment into your bank account from as many sources as your bank cope with, which I’m pretty sure is more inputs than you’ve got DC pensions.
So you might say that “guided retirement” is just a matter of luck whether what you keep on getting in future is in line with what you were promised and you’ll be able to gauge which is doing well and which is doing not so well. How this is conveyed to the “pensioner” is something that I don’t suppose much thought has yet been given. Here Richard, Peter and Robert try to get to grips with the subject.
Robert and Peter have a lot in common, they are both with Scottish Widows and nearing retirement. With no disrespect, Scottish Widows are not known for their in retirement prowess having played with being an annuity provider but most certainly not turning towards CDC, even at retirement.
The Scottish Widows guided retirement (default drawn flexing and fixing to retirement) could do one of three things
- Beat the original promise and provide more money at the point when the “flex” fixes with an annuity
- Hit target and get what you thought you would because you were promised it
- Get below what you were expecting – even running out of money.
I don’t see this as very different from advised or non-advised drawdown. The only difference in the product is that you get a promise will last as long as the pensioner does (unless it runs out).
What is much more important is that by the time you get to guided retirement kicking in (the scheme retirement age) you have the right of doing you own thing and avoid being defaulted. A proportion just cash out as soon as they can while others try to go somewhere towards turning their pot to a pension,
Scottish Widows are worried that people don’t pay enough attention to their options and damage their pot by taking money in an inefficient way. People can’t generally afford pension or get hold of an adviser when they don’t have much in the pot. So there is “targeted support” to tell them what options there are and how they work. Unsurprisingly, Scottish Widows find that those who reach out to get targeted support are happy with it/
Bus isn’t this the problem, not many people do as they were expected to. For all kinds of reasons people haven’t been to Pensions Wise or MaPS or to the group personal pensions.
Pete Glancy is worried by people who are using their pot to pay off debt or keeping money in their bank. They won’t get to retirement age and won’t get guiding retirement – or anything like a pension. There are alternatives to flex and fix which will be rolled out to those heading for guided retirement though I have no idea what they are. Perhaps he means Retirement CDC.
Actually , Pete and Robert find themselves agreeing that people have too complicated finances in retirement to be helped much by something like a pension and will probably want the flexibility of a pot to draw from.
They say that Government wants us to phase out “pot” as a word and get to “income”.
They want everyone to be “triaged” which sounds good for someone but not for ordinary folk who signed up for a pension. Being triaged into the correct solution that is optimal for them and their family – it seems to be what you get if you are being targeted supported.
This looks a long way from the defaults of a retirement income lasting as long as the person getting paid (an income increasing with inflation we are promised).
What looks even further to reality is the chance for people seeing multiple pots on the pension dashboard turn into one pot. Because people who do nothing with multiple pots will get multiple experiences from their differing defaults.
Frankly I am no wiser. It strikes me that so long as pots are around there will be such a lot of choice that people will be tormented by offers of advice, targeted support and options, options , options.
This is why we need a radical change for the ordinary people so those who were auto-enrolled. The nearest I can see that’s common sense is flex and fix and while the lads reckon that something better is on the way, it doesn’t sound like a pension to me.
Nest have come nearest to a proper pension from their pots and it depends on a lot of assumptions and a great deal getting on to £100bn to stabilise the returns. But the life companies with groups of personal pensions, look a long way from anything simple enough for most of us
