Budget turns up the heat on pension innovation

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Following the overhaul of the UK pensions system, Dominic Grinstead, Managing Director of MetLife UK, comments on the implications of the proposed changes announced by the chancellor in yesterday's budget.

Following the overhaul of the UK pensions system, Dominic Grinstead, Managing Director of MetLife UK, comments on the implications of the proposed changes announced by the chancellor in yesterday's budget. (Source: https://www.gov.uk/government/speeches/chancellor-george-osbornes-budget-2014-speech)

Dominic Grinstead, Managing Director, MetLife UK, said: “Providers need to work harder on innovation on products particularly for those with pension funds in excess of £30,000. Rising savings levels being delivered by workplace pensions auto-enrolment make this even more important.

“Guarantees will play a major role in the innovation as savers will need certainty over income and capital in the run-up to retirement now that we are seeing the biggest change to pension tax legislation since 1921.”

“The Budget reforms could not be more welcome or more fundamental as they make it clear that retirement savers can draw down as much or as little as they want from their pension funds whenever they want. No one will have to buy an annuity.

“The annuity market has not been working well for consumers and the Budget reforms simply recognise the new retirement reality and the need for innovation in how we save for retirement and take an income. Standard annuities are not able to meet the challenges of increased longevity and persistently low long-term interest rates and alternatives such as drawdown unit linked guarantees or equity release products should be part of the menu of retirement income solutions.

“Access to advice is crucial and the commitment to provide face to face advice is an important part of the Government reforms. MetLife would like to see specific adviser training on retirement income to help boost understanding of solutions. That has to go hand in hand with consumer education on retirement income which could be delivered through the workplace.”

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Tom Wilson
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