Annuities – the most appropriate route for most
The Pensions Policy Institute (PPI) has recently published a briefing note outlining their thoughts on the removal, in April 2011 of the requirement for individuals to purchase an annuity by the time they reached 75. The PPI looked at the implications on choice of retirement vehicle on low, medium and higher earners.
Their view is that for the vast majority of people the traditional annuity route would still be the most appropriate and safest option. The report said that most people would not have large enough pension pots to be able to consider other forms of retirement vehicle such as Capped or Flexible Drawdown, which are more appropriate for high earners.
These drawdown products allow people more flexibility to potentially grow their pension savings during retirement, the report states that; “For people with large savings and a high appetite for risk, the changes will be very welcome and could be beneficial. However, individuals deciding to use Capped and Flexible Draw- down may also be exposed to more risks to their retirement income.”
The PPI concludes that; “The Government will need to ensure that people have access to clear, appropriate and accessible advice and information to ensure that they understand both the potential upsides but also the inherent risks involved in accessing private DC pension savings more flexibly.”
For more information visit the PPI website.